What changed in this filing

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Item 1. Financial Statements

2024-10-31 compared with 2024-08-01 · 128 added, 112 removed, 577 unchanged (29% of the section changed)

1 unchanged sentence

Condensed Consolidated Balance Sheets

As of June 30, As of December 31,

As of September 30, As of December 31,

(In thousands)

20 unchanged sentences

Operating lease liability, noncurrent 94,762 120,770

Finance lease liability, noncurrent 4,964 9,191

Long-term debt, net 990,173 988,953

6 unchanged sentences

Additional paid-in capital 15,299,179 14,797,723

Accumulated other comprehensive (loss) income ( 10,671 ) 619

Accumulated other comprehensive income 24,395 619

Accumulated deficit ( 7,094,862 ) ( 5,065,972 )

3 unchanged sentences

Condensed Consolidated Statements of Operations

Three Months Ended Six Months Ended

June 30, June 30,

Three Months Ended Nine Months Ended

September 30, September 30,

2024 2023 2024 2023

11 unchanged sentences

Loss from operations ( 4,894 ) ( 108,903 ) ( 67,435 ) ( 514,814 )

Other expenses, net:

Other income (expenses), net:

Share of losses from equity method investment ( 25,279 ) ( 31,058 ) ( 78,794 ) ( 93,838 )

1 unchanged sentence

Other income, net 27,325 1 72,644 17,731

Total other expenses, net ( 7,206 ) ( 23,616 ) ( 8,863 ) ( 91,204 )

Total other income (expenses), net 1,243 ( 31,057 ) ( 7,620 ) ( 122,261 )

Loss before provision for income taxes ( 3,651 ) ( 139,960 ) ( 75,055 ) ( 637,075 )

4 unchanged sentences

See accompanying notes to condensed consolidated financial statements.

Condensed Consolidated Statements of Comprehensive (Loss) Income

Three Months Ended Six Months Ended

June 30, June 30,

Condensed Consolidated Statements of Comprehensive Income (Loss)

Three Months Ended Nine Months Ended

September 30, September 30,

2024 2023 2024 2023

1 unchanged sentence

Net loss $ ( 9,726 ) $ ( 141,707 ) $ ( 96,933 ) $ ( 650,033 )

Other comprehensive (loss) income:

Unrealized (loss) gain on marketable securities ( 1,821 ) 8,605 ( 7,014 ) 39,355

Other comprehensive income:

Unrealized gain on marketable securities 29,317 13,921 22,303 53,276

Foreign currency translation — 5,018 — 5,587

3 unchanged sentences

investment ( 864 ) ( 2,764 ) 188 17,030

Total other comprehensive (loss) income ( 5,730 ) 11,670 ( 11,290 ) 60,886

Comprehensive loss attributable to common stockholders $ ( 37,588 ) $ ( 154,517 ) $ ( 98,497 ) $ ( 447,440 )

Total other comprehensive income 35,066 7,549 23,776 68,435

Comprehensive income (loss) attributable to common

stockholders $ 25,340 $ ( 134,158 ) $ ( 73,157 ) $ ( 581,598 )

See accompanying notes to condensed consolidated financial statements.

Condensed Consolidated Statements of Stockholders’ Equity

Three Months Ended June 30, 2024

Class A Additional Paid-In Capital Accumulated Other Comprehensive Loss

Three Months Ended September 30, 2024

Class A 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 March 31, 2024 177,471,887 $ 177 $ 14,960,837 $ ( 4,941 ) $ ( 5,508,343 ) $ 9,447,730

Balance as of June 30, 2024

164,150,089 $ 164 $ 15,136,786 $ ( 10,671 ) $ ( 6,446,806 ) $ 8,679,473

Net loss — — — — ( 9,726 ) ( 9,726 )

2 unchanged sentences

Value of equity awards withheld for tax liability ( 302 ) — ( 18 ) — — ( 18 )

Shares issued under ESPP 394,479 — 20,601 — — 20,601

Shares of Class A common stock issued and donated to charity 22,102 — 1,301 — — 1,301

Unrealized loss on marketable securities

Unrealized gain on marketable securities

— — — 29,317 — 29,317

4 unchanged sentences

Stock-based compensation — — 159,413 — — 159,413

Balance as of June 30, 2024 164,150,089 $ 164 $ 15,136,786 $ ( 10,671 ) $ ( 6,446,806 ) $ 8,679,473

Stock-based compensation - restructuring — — 730 — — 730

Balance as of September 30, 2024

155,386,309 $ 155 $ 15,299,179 $ 24,395 $ ( 7,094,862 ) $ 8,228,867

See accompanying notes to condensed consolidated financial statements.

Condensed Consolidated Statements of Stockholders’ Equity

Six Months Ended June 30, 2024

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

Nine Months Ended September 30, 2024

Class A Additional Paid-In Capital Accumulated Other Comprehensive Income

Accumulated Deficit Total Stockholders' Equity

10 unchanged sentences

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

Unrealized loss on marketable securities

Unrealized gain on marketable securities

— — — 22,303 — 22,303

4 unchanged sentences

Stock-based compensation - restructuring — — 3,178 — — 3,178

Balance as of June 30, 2024 164,150,089 $ 164 $ 15,136,786 $ ( 10,671 ) $ ( 6,446,806 ) $ 8,679,473

Balance as of September 30, 2024

155,386,309 $ 155 $ 15,299,179 $ 24,395 $ ( 7,094,862 ) $ 8,228,867

See accompanying notes to condensed consolidated financial statements.

Condensed Consolidated Statements of Stockholders’ Equity

Three Months Ended June 30, 2023

Class A Common Stock

Class B Additional Paid-In Capital Accumulated Other Comprehensive Loss

Three Months Ended September 30, 2023

Class A Additional Paid-In Capital Accumulated Other Comprehensive Loss

Accumulated Deficit Total Stockholders' Equity

Shares Amount Shares Amount

Shares Amount

(In thousands, except share amounts)

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

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 )

2 unchanged sentences

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

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 — 1,339 — — 1,339

3 unchanged sentences

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

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

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

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.

Condensed Consolidated Statements of Stockholders’ Equity

Six Months Ended June 30, 2023

Nine Months Ended September 30, 2023

Class A Common Stock

18 unchanged sentences

Stock-based compensation - restructuring — — — — 11,096 — — 11,096

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

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.

Condensed Consolidated Statements of Cash Flows

Six Months Ended

Nine Months Ended

September 30,

CASH FLOWS FROM OPERATING ACTIVITIES:

1 unchanged sentence

Net loss $ ( 96,933 ) $ ( 650,033 )

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

Adjustments to reconcile net loss to net cash provided by operating activities:

Depreciation and amortization 156,170 218,968

4 unchanged sentences

Amortization of deferred commissions 56,984 54,428

Unrealized loss on equity securities 2,641 9,750

Provision for doubtful accounts 18,123 41,454

12 unchanged sentences

Other long-term liabilities ( 1,149 ) ( 2,436 )

Net cash provided by (used in) operating activities 403,466 ( 14,220 )

Net cash provided by operating activities 607,795 192,207

CASH FLOWS FROM INVESTING ACTIVITIES:

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

Divestitures, net of cash divested — 38,194

Purchases of marketable securities and other investments ( 739,721 ) ( 1,391,975 )

11 unchanged sentences

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

NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH, including cash classified as held for sale 116,828 26,309

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

NET INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH 116,828 19,003

NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH ( 54,268 ) 21,839

CASH, CASH EQUIVALENTS AND RESTRICTED CASH—Beginning of period 655,931 656,078

41 unchanged sentences

(d) Remaining Performance Obligations

Revenue allocated to remaining performance obligations for contracts with durations of more than one year was $ 152.6 million as of June 30, 2024, of which 64 % is expected to be recognized over the next 12 months and 93 % 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 $ 148.1 million as of September 30, 2024, of which 65 % is expected to be recognized over the next 12 months and 95 % is expected to be recognized over the next 24 months.

(e) Deferred Revenue and Customer Deposits

As of June 30, 2024, and December 31, 2023, the Company recorded $ 138.7 million and $ 144.5 million as its deferred revenue and customer deposits, respectively.

During the three months ended June 30, 2024 and 2023, the Company recognized $ 32.1 million and $ 27.2 million of revenue, respectively, that was included in the deferred revenue and customer deposits balances as of the end of the previous year.

During the six months ended June 30, 2024 and 2023, the Company recognized $ 97.4 million and $ 98.6 million of revenue, respectively, that was included in the deferred revenue and customer deposits balances as of the end of the previous year.

As of September 30, 2024, and December 31, 2023, the Company recorded $ 138.8 million and $ 144.5 million, respectively, as its deferred revenue and customer deposits.

During the three months ended September 30, 2024 and 2023, the Company recognized $ 16.3 million and $ 16.7 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, 2024 and 2023, the Company recognized $ 113.7 million and $ 115.3 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

7 unchanged sentences

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

As of June 30, 2024, and December 31, 2023, the allowance for doubtful accounts was $ 37.2 million and $ 42.0 million, respectively, and is recorded in accounts receivable, net, in the accompanying condensed consolidated balance sheets.

In the three and six months ended June 30, 2024 and 2023, no customer organization accounted for more than 10% of the Company’s total revenue.

As of June 30, 2024 and December 31, 2023, no customer organization represented more than 10% of the Company’s gross accounts receivable.

As of September 30, 2024, and December 31, 2023, the allowance for doubtful accounts was $ 26.7 million and $ 42.0 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, 2024 and 2023, no customer organization accounted for more than 10% of the Company’s total revenue.

As of September 30, 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 six months ended June 30, 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.

The Company enacted various workforce reduction plans in 2023 and 2024.

In the nine months ended September 30, 2024, restructuring charges incurred, cash paid and the estimated remaining expenses related to these plans were not significant.

(h) Recently Issued Accounting Guidance, Not yet Adopted

19 unchanged sentences

12 Months Fair Value Hierarchy as of

June 30, 2024 Aggregate

September 30, 2024 Aggregate

Level 1 Level 2 Level 3

42 unchanged sentences

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

Interest earned on debt securities was $ 23.5 million and $ 50.6 million in the three and six months ended June 30, 2024, respectively, and $ 16.7 million and $ 33.9 million in the three and six months ended June 30, 2023, respectively.

Interest earned on debt securities was $ 20.1 million and $ 70.7 million in the three and nine months ended September 30, 2024, respectively, and $ 19.3 million and $ 53.2 million in the three and nine months ended September 30, 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 June 30, As of December 31,

As of September 30, As of December 31,

Cost Aggregate

7 unchanged sentences

Strategic Investments

As of June 30, 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.

As of September 30, 2024 and December 31, 2023, the Company held strategic investments with a carrying value of $ 30.3 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.

There were no significant impairments or adjustments recorded in the six months ended June 30, 2024 related to these investments.

During the six months ended June 30, 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.

There were no significant impairments or adjustments recorded in the nine months ended September 30, 2024 related to these investments.

During the nine months ended September 30, 2023, the Company recorded an impairment loss of $ 46.2 million related to one of these investments in other income (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 June 30, 2024 and December 31, 2023, the aggregate fair value of these liabilities and the associated unrealized losses were not significant.

As of September 30, 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 June 30, 2024, the fair values of the 2029 Notes and 2031 Notes were $ 453.5 million and $ 443.3 million, respectively.

As of September 30, 2024, the fair values of the 2029 Notes and 2031 Notes were $ 467.0 million and $ 462.4 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.

1 unchanged sentence

Property and equipment consisted of the following:

As of June 30, As of December 31,

As of September 30, As of December 31,

(In thousands)

11 unchanged sentences

____________________________________

( 1 ) Data center equipment contains $ 72.4 million in assets held under finance leases as of June 30, 2024 and December 31, 2023.

Accumulated depreciation and amortization includes $ 62.7 million and $ 55.9 million of accumulated depreciation for assets held under finance leases as of June 30, 2024, and December 31, 2023, respectively.

Depreciation and amortization expense was $ 23.3 million and $ 24.3 million in the three months ended June 30, 2024 and 2023, respectively, and $ 47.2 million and $ 44.3 million in the six months ended June 30, 2024 and 2023, respectively.

The Company capitalized $ 20.4 million and $ 14.8 million in internal‑use software development costs in the three months ended June 30, 2024 and 2023, respectively, and $ 36.5 million and $ 29.0 million in the six months ended June 30, 2024 and 2023, respectively.

( 1 ) Data center equipment contains $ 72.4 million in assets held under finance leases as of September 30, 2024 and December 31, 2023.

Accumulated depreciation and amortization includes $ 65.5 million and $ 55.9 million of accumulated depreciation for assets held under finance leases as of September 30, 2024, and December 31, 2023, respectively.

Depreciation and amortization expense was $ 22.8 million and $ 23.2 million in the three months ended September 30, 2024 and 2023, respectively, and $ 70.0 million and $ 67.5 million in the nine months ended September 30, 2024 and 2023, respectively.

The Company capitalized $ 20.0 million and $ 14.7 million in internal‑use software development costs in the three months ended September 30, 2024 and 2023, respectively, and $ 56.5 million and $ 43.7 million in the nine months ended September 30, 2024 and 2023, respectively.

There were no divestitures in the three and nine months ended September 30, 2024.

In the three months ended September 30, 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.

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.

No other significant divestitures were completed in the three and nine months ended September 30, 2023.

Segment Reporting

As of June 30, 2024, the Company had two operating and reportable segments:

As of September 30, 2024, the Company had two operating and reportable segments:

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

5 unchanged sentences

The key product from which the segment derives its revenue is Segment.

Presented below is the discrete financial information by reportable segment for the three and six months ended June 30, 2024 and 2023, that is regularly reviewed by the CODM for performance assessment and resource allocation decisions.

Presented below is the discrete financial information by reportable segment for the three and nine months ended September 30, 2024 and 2023, that is regularly reviewed by the CODM for performance assessment and resource allocation decisions.

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

4 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

8 unchanged sentences

Total $ 182,418 $ 136,434 $ 517,347 $ 360,368

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

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

Total non-GAAP income from operations $ 182,418 $ 136,434 $ 517,347 $ 360,368

8 unchanged sentences

Loss from operations ( 4,894 ) ( 108,903 ) ( 67,435 ) ( 514,814 )

Other expenses, net ( 7,206 ) ( 23,616 ) ( 8,863 ) ( 91,204 )

Other income (expenses), net

1,243 ( 31,057 ) ( 7,620 ) ( 122,261 )

Loss before provision for income taxes $ ( 3,651 ) $ ( 139,960 ) $ ( 75,055 ) $ ( 637,075 )

Derivatives and Hedging

As of June 30, 2024, the Company had outstanding foreign currency forward contracts designated as cash flow hedges with a total sell notional value of $ 186.1 million.

As of September 30, 2024, the Company had outstanding foreign currency forward contracts designated as cash flow hedges with a total sell notional value of $ 200.6 million.

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

As of June 30, 2024, these contracts had maturities of up to 17 months.

As of September 30, 2024, these contracts had maturities of up to 16 months.

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

3 unchanged sentences

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

As of June 30, 2024, the Company did not have any offsetting arrangements.

As of September 30, 2024, the Company did not have any offsetting arrangements.

Goodwill and Intangible Assets

As of June 30, 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 six months ended June 30, 2024.

As of September 30, 2024 and December 31, 2023, the balance of the Company’s goodwill was $ 5.2 billion, of which $ 4.9 billion related to the Communications reportable segment and $ 306.1 million related to the Segment reportable segment.

There was no goodwill activity during the nine months ended September 30, 2024.

Intangible assets

Intangible assets consisted of the following:

As of June 30, 2024

As of September 30, 2024

Cost Accumulated Amortization Net

27 unchanged sentences

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

Amortization expense was $ 28.2 million and $ 50.2 million for the three months ended June 30, 2024 and 2023, respectively, and $ 57.2 million and $ 101.1 million for the six months ended June 30, 2024 and 2023, respectively.

Amortization expense was $ 27.5 million and $ 48.9 million for the three months ended September 30, 2024 and 2023, respectively, and $ 84.7 million and $ 150.0 million for the nine months ended September 30, 2024 and 2023, respectively.

Total estimated future amortization expense is as follows:

As of June 30, 2024

As of September 30, 2024

Year Ended December 31, (In thousands)

2024 (remaining six months) $ 54,880

2024 (remaining three months) $ 27,393

Thereafter 38,837

2 unchanged sentences

Accrued expenses and other current liabilities consisted of the following:

As of June 30, As of December 31,

As of September 30, As of December 31,

(In thousands)

Accrued payroll and related $ 63,660 $ 77,593

Accrued bonus and commission 67,549 17,345

Corporate bonus program accrual 70,182 —

Accrued commission 18,024 17,345

Accrued cost of revenue 164,472 155,721

8 unchanged sentences

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

As of June 30, As of December 31,

As of September 30, As of December 31,

(In thousands)

10 unchanged sentences

Total long-term debt, net $ 990,173 $ 988,953

As of June 30, 2024, the Company was in compliance with all of its covenants under the related indentures.

As of September 30, 2024, the Company was in compliance with all of its covenants under the related indentures.

Revenue by Geographic Area

2 unchanged sentences

Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

10 unchanged sentences

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

In the three and six months ended June 30, 2024, the Company did not enter into any significant new lease agreements.

In the three and nine months ended September 30, 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 six months ended June 30, 2024, the Company entered into several such agreements with terms up to three years for a total purchase commitment of $ 25.6 million and $ 40.8 million, respectively.

In the three and nine months ended September 30, 2024, the Company entered into several such agreements with terms up to four years for a total purchase commitment of $ 14.4 million and $ 55.2 million, respectively.

(b) Legal Matters

2 unchanged sentences

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.

The Company accrues for contingencies when it believes that a loss is probable and can be reasonably estimated.

To the extent there is a reasonable possibility that a loss may be incurred that is in excess of the amounts already recognized and such additional loss amount may be material, the Company either discloses the estimated additional loss amount or states 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.

3 unchanged sentences

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 June 30, 2024, and December 31, 2023, no amounts were accrued related to any outstanding indemnification agreements.

As of September 30, 2024, and December 31, 2023, no amounts were accrued related to any outstanding indemnification agreements.

(d) Other Taxes

1 unchanged sentence

In many of these jurisdictions, non-income-based taxes, such as sales, use, telecommunications and other local taxes are assessed on the Company’s operations.

The Company carries reserves for certain of its non-income-based tax exposures in certain jurisdictions when it is both probable that a liability was incurred and the amount of the exposure could be reasonably estimated.

These reserves are based on estimates which include several key assumptions including, but not limited to, the taxability of the Company’s services, the jurisdictions in which its management believes it had nexus and the sourcing of revenues to those jurisdictions.

1 unchanged sentence

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.

As of June 30, 2024, the liabilities recorded for the non-income-based taxes were $ 18.6 million for domestic jurisdictions and $ 20.2 million for jurisdictions outside of the United States.

As of September 30, 2024, the liabilities recorded for the non-income-based taxes were $ 18.5 million for domestic jurisdictions and $ 19.7 million for jurisdictions outside of the United States.

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

1 unchanged sentence

Preferred Stock

As of June 30, 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 June 30, 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 June 30, 2024, 164,150,089 shares of Class A common stock and no shares of Class B common stock were issued and outstanding.

As of September 30, 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 September 30, 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 September 30, 2024, 155,386,309 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.

1 unchanged sentence

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

As of June 30, As of December 31,

As of September 30, As of December 31,

Stock options issued and outstanding 1,392,697 1,722,861

10 unchanged sentences

Both programs expire on December 31, 2024.

In the three months ended June 30, 2024 and 2023, the Company repurchased 15.2 million and 6.4 million shares of its Class A common stock, respectively, for an aggregate purchase price of $ 898.6 million and $ 370.0 million, respectively.

In the six months ended June 30, 2024 and 2023, the Company repurchased 21.4 million and 8.3 million shares of its Class A common stock, respectively, for an aggregate purchase price of $ 1.3 billion and $ 495.0 million, respectively.

As of June 30, 2024, approximately $ 1.0 billion of the aggregate amount authorized under the stock repurchase programs remained available for future repurchases.

In the three months ended September 30, 2024 and 2023, the Company repurchased 10.6 million and 0.9 million shares of its Class A common stock, respectively, for an aggregate purchase price of $ 633.0 million and $ 56.0 million, respectively.

In the nine months ended September 30, 2024 and 2023, the Company repurchased 32.0 million and 9.2 million shares of its Class A common stock, respectively, for an aggregate purchase price of $ 1.9 billion and $ 551.0 million, respectively.

As of September 30, 2024, approximately $ 412.0 million of the aggregate amount authorized under the stock repurchase programs remained available for future repurchases.

Stock-Based Compensation

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Certain of the Company’s outstanding equity awards were granted under equity incentive plans that are no longer active but continue to govern the outstanding equity awards granted thereunder.

In the second quarter of 2024, the Company granted performance-based restricted stock units (“PSUs”) covering 516,626 shares that had an aggregate grant date fair value of $ 34.5 million to certain of its executive employees.

In the second quarter of 2024, the Company granted certain of its executive employees performance-based restricted stock units (“PSUs”) covering 516,626 shares of Class A common stock that had an aggregate grant date fair value of $ 34.5 million.

The PSUs will vest if certain operational performance or market conditions, as defined in the grant agreements, are met during the performance achievement period, which expires on December 31, 2026.

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

As of June 30, 2024, total unrecognized compensation cost related to unvested restricted stock units was $ 1.5 billion which will be amortized over a weighted-average period of 2.9 years.

As of June 30, 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.

As of September 30, 2024, total unrecognized compensation cost related to unvested restricted stock units was $ 1.4 billion which will be amortized over a weighted-average period of 2.7 years.

As of September 30, 2024, total unrecognized compensation cost related to unvested stock options and the ESPP was not significant.

Stock-Based Compensation Expense

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

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Three Months Ended

June 30, Six Months Ended

September 30, Nine Months Ended

September 30,

2024 2023 2024 2023

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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 June 30,

As of September 30,

Stock options issued and outstanding 1,392,697 1,778,852

5 unchanged sentences

Total 22,275,202 22,892,127

The Company has historically computed its provision for income taxes for interim periods using an estimated annual effective tax rate (“AETR”) based on anticipated annual pretax income or loss, which was adjusted for discrete items recorded in the period.

The Company has historically computed its provision for income taxes for interim periods using a forecasted annual effective tax rate (“AETR”) based on anticipated annual pretax income or loss, which was adjusted for discrete items recorded in the period.

However, due to the level of forecasted provision for income taxes relative to the forecasted pre-tax income used in computing the effective tax rate, the effective tax rate is highly sensitive to fluctuations in pre-tax income and does not provide a reasonable estimate for income taxes in the interim period.

As such, the Company computed its provision for income taxes based on the year-to-date actual effective tax rate for the three and six months ended June 30, 2024.

As such, the Company computed its provision for income taxes based on the year-to-date actual effective tax rate for the three and nine months ended September 30, 2024.

The Company plans to revert to applying a forecasted annual effective tax rate to year-to-date earnings and adjusting for discrete items once that method produces more reasonable results.

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 provision for income taxes recorded in the three months ended June 30, 2024 consists primarily of federal, state and foreign income taxes and withholding taxes in foreign jurisdictions in which the Company conducts business.

The provision for income taxes recorded in the six months ended June 30, 2024 consists primarily of the same factors and also income tax expense from a foreign audit settlement.

The provision for income taxes recorded in the three and six months ended June 30, 2023 consists primarily of income taxes and withholding taxes, partially offset by an income tax benefit from the release of tax liabilities related to uncertain tax positions for which the statute of limitation had lapsed.

The provision for income taxes recorded in the three months ended September 30, 2024 consists primarily of federal, state and foreign income taxes and withholding taxes in foreign jurisdictions in which the Company conducts business.

The provision for income taxes recorded in the nine months ended September 30, 2024 consists primarily of the same factors and also income tax expense from a foreign audit settlement.

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 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 six months ended June 30, 2024, the value of the transactions that occurred between the Company and Syniverse were $ 35.2 million and $ 69.2 million, respectively.

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

For the three and nine months ended September 30, 2024, the value of the transactions that occurred between the Company and Syniverse were $ 34.6 million and $ 103.8 million, respectively.

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.

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

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• 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;

• the benefits and efficiencies we expect to derive from workforce reductions and other cost-saving initiatives, and from our cash bonus program;

• 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;

1 unchanged sentence

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

• our expectations regarding our Segment business, including the targets set as a result of our 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 Segment business, including the targets set as a result of our operational review of Segment, new product releases, the expected benefits and timeline of the migration to a new infrastructure provider, increased investment and go-to-market focus to capture market share, and increased revenue growth;

• our ability to retain and increase revenue from existing customers and attract new customers, including enterprises and international organizations;

34 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 1. Financial Statements