What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2025-02-26 compared with 2024-02-27 · 314 added, 328 removed, 1087 unchanged (37% of the section changed)

18 unchanged sentences

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Annual Report on Internal Control Over Financial Reporting.

The Company’s management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management's Annual Report on Internal Control Over Financial Reporting.

Our responsibility is to express an opinion on the Company’s consolidated financial statements and an opinion on the Company’s internal control over financial reporting based on our audits.

64 unchanged sentences

Operating lease liability, noncurrent 85,875 120,770

Finance lease liability, noncurrent 9,191 21,290

Long-term debt, net 990,587 988,953

4 unchanged sentences

Preferred stock, $ 0.001 par value, 100,000,000 shares authorized, none issued

Class A and Class B common stock, $ 0.001 par value per share

Authorized shares 1,003,170,181 and 1,100,000,000 as of December 31, 2023 and 2022;

Class A common stock, $ 0.001 par value per share

Authorized shares 1,000,000,000 as of December 31, 2024 and 2023;

Issued and outstanding shares 152,610,697 and 181,945,771 as of December 31, 2024 and 2023

Additional paid-in capital 15,476,124 14,797,723

Accumulated other comprehensive income (loss) 619 ( 121,161 )

Accumulated other comprehensive (loss) income ( 1,301 ) 619

Accumulated deficit ( 7,522,010 ) ( 5,065,972 )

33 unchanged sentences

Net loss $ ( 109,403 ) $ ( 1,015,441 ) $ ( 1,256,145 )

Other comprehensive income (loss):

Other comprehensive (loss) income:

Unrealized gain (loss) on marketable securities

5 unchanged sentences

734 15,553 ( 14,940 )

Total other comprehensive income (loss) 121,780 ( 103,020 ) ( 27,187 )

Total other comprehensive (loss) income

( 1,920 ) 121,780 ( 103,020 )

Comprehensive loss attributable to common stockholders $ ( 111,323 ) $ ( 893,661 ) $ ( 1,359,165 )

1 unchanged sentence

Consolidated Statements of Stockholders’ Equity

Class A Common Stock

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

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)

5 unchanged sentences

Value of equity awards withheld for tax liability ( 28,006 ) — ( 2,000 ) — — ( 2,000 )

Conversion of shares of Class B common stock into shares of Class A common stock 9,745,587 12 ( 9,745,587 ) ( 12 ) — — — —

Shares of Class A common stock issued and donated to charity 88,408 — 5,907 — — 5,907

1 unchanged sentence

— — — 7,332 — 7,332

Repurchases of shares of Class A common stock including

related costs

Repurchases of shares of Class A common stock including related costs

( 36,848,645 ) ( 36 ) — — ( 2,346,635 ) ( 2,346,671 )

Foreign currency translation — — — — — 5,587 — 5,587

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

Shares issued under ESPP 632,375 — 33,045 — — 33,045

Net change in market value of effective foreign currency forward exchange contracts — — — ( 9,986 ) — ( 9,986 )

Share of other comprehensive loss from equity method investment — — — — — 15,553 — 15,553

Share of other comprehensive income from equity method investment

— — — 734 — 734

Stock-based compensation — — 634,129 — — 634,129

5 unchanged sentences

Class A Common Stock

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

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

Accumulated Deficit Total Stockholders' Equity

8 unchanged sentences

Shares of Class A common stock issued and donated to charity 88,408 — — — 5,346 — — 5,346

Unrealized loss on marketable securities — — — — — ( 83,049 ) — ( 83,049 )

Unrealized gain on marketable securities — — — — — 99,742 — 99,742

Repurchases of shares of Class A common stock including related costs

( 11,292,516 ) ( 11 ) — — — — ( 674,695 ) ( 674,706 )

Foreign currency translation — — — — — 5,587 — 5,587

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

Shares issued under ESPP 906,728 — — — 36,496 — — 36,496

Net change in market value of effective foreign currency forward exchange contracts — — — — — 898 — 898

Share of other comprehensive loss from equity method investment — — — — — ( 14,940 ) — ( 14,940 )

Share of other comprehensive income from equity method investment

— — — — — 15,553 — 15,553

Stock-based compensation — — — — 682,241 — — 682,241

4 unchanged sentences

Class A Common Stock

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

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

Accumulated Deficit Total Stockholders' Equity

7 unchanged sentences

Conversion of shares of Class B common stock into shares of Class A common stock 616,731 — ( 616,731 ) — — — — —

Equity component from partial settlement and redemption of convertible senior notes due 2023 4,846,965 5 — — 335,637 — — 335,642

Settlement of capped call, net of related costs — — — — 225,233 — — 225,233

Shares of Class A common stock issued under ESPP 198,926 — — — 48,465 — — 48,465

Shares of Class A common stock issued and donated to charity 88,408 — — — 9,541 — — 9,541

Issuance of shares of Class A common stock in connection with a follow-on public offering, net of underwriters' discounts and issuance costs 4,312,500 4 — — 1,765,709 — — 1,765,713

Shares of Class A common stock issued in acquisition 1,116,816 1 — — 419,169 — — 419,170

Value of equity awards assumed in acquisition — — — — 1,511 — — 1,511

Shares of Class A common stock subject to future vesting 84,230 — — — — — — —

Unrealized loss on marketable securities — — — — — ( 83,049 ) — ( 83,049 )

Foreign currency translation — — — — — ( 5,587 ) — ( 5,587 )

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

Shares issued under ESPP 534,401 2 — — 37,063 — — 37,065

Net change in market value of effective foreign currency forward exchange contracts — — — — — 556 — 556

Share of other comprehensive loss from equity method investment — — — — — ( 14,940 ) — ( 14,940 )

Stock-based compensation — — — — 804,845 — — 804,845

Stock-based compensation - restructuring — — — — 14,275 — — 14,275

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

19 unchanged sentences

Loss on net assets divested — 32,277 —

Loss on extinguishment of debt — — 28,965

Other adjustments 5,009 14,669 4,905

9 unchanged sentences

Net cash provided by (used in) operating activities 716,241 414,752 ( 254,368 )

414,752 ( 254,368 ) ( 58,192 )

CASH FLOWS FROM INVESTING ACTIVITIES:

7 unchanged sentences

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from public offerings, net of underwriters' discounts — — 1,766,400

Payments of costs related to public offerings — — ( 35 )

Proceeds from issuance of senior notes due 2029 and 2031, net of issuance costs — — 984,723

Proceeds from settlements of capped call, net of settlement costs — — 228,412

Principal payments on debt and finance leases ( 16,134 ) ( 13,423 ) ( 8,295 )

Principal payments on finance leases ( 12,558 ) ( 16,134 ) ( 13,423 )

Value of equity awards withheld for tax liabilities ( 2,000 ) ( 2,565 ) ( 1,098 )

3 unchanged sentences

Effect of exchange rate changes on cash, cash equivalents and restricted cash — 108 60

NET (DECREASE) INCREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH ( 147 ) ( 825,753 ) 547,946

NET DECREASE IN CASH, CASH EQUIVALENTS AND RESTRICTED CASH ( 224,494 ) ( 147 ) ( 825,753 )

CASH, CASH EQUIVALENTS AND RESTRICTED CASH—Beginning of period 655,931 656,078 1,481,831

2 unchanged sentences

Cash paid for interest $ 37,904 $ 38,389 $ 37,500

NON-CASH FINANCING ACTIVITIES:

Value of common stock issued and equity awards assumed in acquisition $ — $ — $ 420,681

Value of common stock issued to settle convertible senior notes due 2023 $ — $ — $ 1,704,969

RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH TO THE CONSOLIDATED BALANCE SHEETS

7 unchanged sentences

(the “Company”) was incorporated in the state of Delaware on March 13, 2008.

Today's leading companies trust Twilio's Customer Engagement Platform (CEP) to build direct, personalized relationships with their customers everywhere in the world.

Today's leading companies trust Twilio's Customer Engagement Platform to build direct, personalized relationships with their customers everywhere in the world.

Twilio enables companies to use communications and data to add intelligence and security to every step of their customers’ journey, from sales to marketing to growth, customer service and many more engagement use cases in a flexible, programmatic way.

22 unchanged sentences

The Company sells its services to a wide variety of customers.

If the financial condition or results of operations of any significant customer deteriorate substantially, the Company’s operating results could be adversely affected.

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

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

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.

23 unchanged sentences

Subscription-based fees are derived from various products in both the Communications and Segment segments.

Subscription-based products include products such as Segment, Engage, Flex, Email and others.

Subscription-based products include products such as Segment, Flex, Email and others.

Subscription-based contracts revenue is recognized on a ratable basis over the contractual term which is generally between one to three years .

10 unchanged sentences

Remaining Performance Obligations

Revenue allocated to remaining performance obligations represents unearned revenue and amounts that were and will be invoiced and recognized as revenue in future periods for non-cancelable subscription arrangements with terms greater than one year.

Revenue allocated to remaining performance obligations represents deferred revenue and amounts that were and will be invoiced and recognized as revenue in future periods for non-cancelable subscription arrangements with terms greater than one year.

The Company applies the optional exemption of not disclosing the transaction price allocated to the remaining performance obligations for its usage-based contracts and contracts with original duration of less than one year.

8 unchanged sentences

The Company uses the portfolio of data method to determine the estimated period of benefit of capitalized commissions which is generally determined to be up to five years .

Amortization expense related to these capitalized costs related to initial contracts, upsells and renewals, is recognized on a straight line basis over the estimated period of benefit of the capitalized commissions.

Amortization expense related to these capitalized costs are recognized on a straight line basis over the estimated period of benefit.

The Company applies the optional exemption of expensing these costs as incurred with amortization periods of one year or less.

3 unchanged sentences

Cost of revenue consists primarily of fees paid to network service providers.

Cost of revenue also includes cloud infrastructure fees, direct costs of personnel, such as salaries and stock‑based compensation for our customer support employees, and other non‑personnel costs, such as depreciation and amortization expense related to data centers and hosting equipment, amortization of capitalized internal-use software development costs and acquired intangible assets.

Cost of revenue also includes cloud infrastructure fees, direct costs of personnel, such as salaries and stock‑based compensation for customer support employees, and other non‑personnel costs, such as depreciation and amortization expense related to data centers and hosting equipment, amortization of capitalized internal-use software development costs and acquired intangible assets.

Costs of revenue are generally directly attributable to each segment.

27 unchanged sentences

These costs are recognized as an expense following straight-line attribution method over the requisite service period.

For performance-based restricted stock units (“PSUs”) with operational performance targets, the grant date fair value is the closing price of the Company’s Class A common stock on the date of grant.

The expense is recognized on a straight-line basis over the performance period only if it is probable that the performance target will be achieved.

The probability of achievement is assessed each reporting period and adjustments are recorded accordingly.

For PSUs with market conditions, the grant date fair value is determined using a Monte-Carlo simulation model and the expense is recognized on a straight-line basis over the performance period.

The Company uses the Black-Scholes option pricing model to measure the fair value of its stock options and the purchase rights issued under the Company's 2016 Employee Stock Purchase Plan, as amended (the “ESPP”).

The fair value of the restricted stock units is determined using the closing fair value of the Company's Class A common stock on the date of grant and recognized as an expense following straight-line attribution method over the requisite service period.

The grant date fair value of the restricted stock units (“RSUs”) is the closing price of the Company's Class A common stock on the date of grant.

The expense for options, purchase rights issued under the ESPP and RSUs is recognized on a straight-line basis over the requisite service period.

Forfeitures are recorded in the period in which they occur.

8 unchanged sentences

• Expected volatility.

Prior to July 2021, the expected volatility was derived from an average of the historical volatilities of the Class A common stock of the Company and several other entities with characteristics similar to those of the Company, such as the size and operational and economic similarities to the Company's principal business operations.

Beginning in July 2021, the expected volatility was derived from the average of the historical volatilities of the Class A common stock of the Company.

The expected volatility is derived from the average of the historical volatilities of the Class A common stock of the Company.

• Risk -free interest rate.

5 unchanged sentences

(n) Income Taxes

The Company accounts for income taxes in accordance with authoritative guidance which requires the use of the asset and liability approach.

Deferred tax assets and liabilities are recognized for future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, as well as net operating loss and tax credit carry-forwards.

The Company accounts for income taxes using the asset and liability approach.

Deferred tax amounts are determined by using the enacted tax rates expected to be in effect when the temporary differences are expected to be recovered or settled.

5 unchanged sentences

The Company records interest and penalties related to uncertain tax positions in the provision for income taxes in the consolidated statements of operations.

As of December 31, 2024, 2023 and 2022, these amounts were not significant.

(o) Foreign Currency

5 unchanged sentences

For those entities where the functional currency is a foreign currency, adjustments resulting from translating the financial statements into U.S.

dollars are recorded as a component of accumulated other comprehensive income (loss) as part of the total stockholders' equity.

dollars are recorded as a component of accumulated other comprehensive (loss) income as part of the total stockholders' equity.

Monetary assets and liabilities denominated in a foreign currency are translated into U.S.

2 unchanged sentences

Equity transactions are translated using historical exchange rates.

(p) Comprehensive Income (Loss)

Comprehensive income (loss) refers to net loss and other revenue, expenses, gains and losses that, under U.S.

(p) Comprehensive Loss

Comprehensive loss refers to net loss and other revenue, expenses, gains and losses that, under U.S.

GAAP, are recorded as an element of stockholders' equity but are excluded from the calculation of net loss.

1 unchanged sentence

The Company calculates its basic and diluted net loss per share attributable to common stockholders in conformity with the two-class method required for companies with participating securities.

The Company has 100,000,000 shares of preferred stock that was authorized but never issued or outstanding.

Class A common stock was the only outstanding class of equity securities of the Company as of December 31, 2023.

The Company has 100,000,000 shares of preferred stock that are authorized but none are issued or outstanding.

Class A common stock was the only outstanding class of equity securities of the Company as of December 31, 2024 and 2023.

Each share of Class A common stock is entitled to one vote per share.

Prior to June 28, 2023, the Company also had outstanding equity securities of Class B common stock.

Prior to June 28, 2023, the Company had outstanding equity securities of Class B common stock.

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 certificate of incorporation.

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

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

The Company retired all of the shares of its Class B common stock that were issued but not outstanding following the Conversion.

The Company also has dilutive securities, such as potential or restricted common shares or common stock equivalents, that were excluded from the calculation of diluted net loss per share attributable to common stockholders as their effect was antidilutive in all periods presented.

2 unchanged sentences

The Company considers all highly liquid investments with an original maturity of three months or less when purchased to be cash equivalents.

Cash equivalents may consist of cash deposited into money market funds, reverse repurchase agreements and commercial paper.

Cash equivalents may consist of cash deposited into money market funds, U.S.

treasury bills and commercial paper.

All credit and debit card transactions that process as of the last day of each month and settle within the first few days of the subsequent month are also classified as cash and cash equivalents as of the end of the month in which they were processed.

6 unchanged sentences

As of December 31, 2024 and 2023, the allowance for doubtful accounts was $ 27.5 million and $ 42.0 million, respectively, and is recorded in accounts receivable, net, in the accompanying consolidated balance sheets.

(t) Costs Related to Public Offerings

Costs related to public offerings, which consist of direct incremental legal, printing and accounting fees are deferred until the offering is completed.

Upon completion of the offering, these costs are offset against the offering proceeds within the consolidated statements of stockholders' equity.

(u) Property and Equipment

(t) Property and Equipment

Property and equipment, both owned and under finance leases, is stated at cost less accumulated depreciation and amortization.

13 unchanged sentences

Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease term and lease liabilities represent the Company’s obligation to make lease payments arising from the lease.

Operating lease ROU assets and lease liabilities are measured and recognized at the lease commencement date based on the present value of the remaining lease payments over the lease term.

Operating lease ROU assets and

lease liabilities are measured and recognized at the lease commencement date based on the present value of the remaining lease payments over the lease term.

As the Company’s leases do not generally provide an implicit rate, the Company uses its incremental borrowing rate based on the information available on the commencement date to determine the present value of lease payments.

5 unchanged sentences

Within the consolidated statements of cash flows, the Company presents the lease payments made on the operating leases as cash flows from operations and principal payments made on the finance leases as part of financing activities.

(w) Equity Method Investments

(v) Equity Method Investments

Equity investment holdings in which the Company does not have a controlling financial interest but can exercise significant influence over the investee are accounted for under the equity method.

12 unchanged sentences

If a decline in the value of an equity method investment is determined to be other than temporary, a loss is recorded in the period of such determination.

(x) Segment Information

(w) 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 (“CEO”), reviews and manages the business, and establishes criteria for aggregating operating segments into reportable segments.

Prior to 2023, the Company had one operating and reportable segment.

As a result of the restructuring activities in 2023, as described in Note 8, the Company operated in and reported its results in two reportable segments.

(y) Business Combinations

The Company operates in and reports its results in two reportable segments.

(x) Business Combinations

The Company records identifiable assets acquired and liabilities assumed at their acquisition date fair values.

8 unchanged sentences

Prior to 2023, the Company had one reporting unit.

During 2023, as a result of restructuring activities described in Note 8, the Company then had multiple reporting units.

The Company reassigns its assets and liabilities to the reporting units based on which reporting units’ operations the assets and liabilities were employed in or were related to.

Goodwill is reassigned using a relative fair value allocation approach.

The Company has selected November 30 as the date to perform its annual goodwill impairment test.

The goodwill impairment test is performed on a reporting unit level.

In the valuation of goodwill, management must make assumptions regarding estimated future cash flows to be derived from the respective reporting unit.

If these estimates or their related assumptions change in the future, the Company may be required to record an impairment of goodwill.

The Company has the option to first perform a qualitative assessment to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

However, the Company may elect to bypass the qualitative assessment and proceed directly to the quantitative impairment tests.

The impairment test involves comparing the fair value of the reporting unit to its carrying value, including goodwill.

A goodwill impairment will be the amount by which a reporting unit’s carrying value exceeds its fair value.

The impairment is limited to the carrying amount of goodwill.

(aa) Intangible Assets

During 2023, as a result of restructuring activities, the Company shifted to a multiple reporting unit structure.

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

Goodwill was reassigned using a relative fair value allocation approach.

The Company historically evaluated goodwill for impairment annually as of November 30 or when an indicator of impairment existed.

During the year ended December 31, 2024, the Company voluntarily changed the date of the annual goodwill impairment assessment for all of its reporting units from November 30 to October 1 and, therefore, evaluated goodwill for impairment on October 1, 2024.

This voluntary change in the annual goodwill assessment date is a change in accounting principle, which the Company believes is preferable as it provides the Company additional time to complete the annual assessment in advance of its year-end reporting, especially in periods when complex fair value measurement is required.

This change in the annual assessment date does not delay, accelerate or avoid an impairment charge.

This change was not applied retrospectively as it was impracticable to do so because retrospective application would require application of significant estimates and assumptions with the use of hindsight.

Accordingly, the change has been applied prospectively.

This change in the assessment date is not a material change to the Company’s financial statements.

The Company has internal controls in place to identify any triggering events subsequent to this assessment date.

(z) Intangible Assets

Intangible assets recorded by the Company include the fair values of identifiable intangible assets acquired in business combinations and costs directly associated with securing legal registration of patents and trademarks and acquiring domain names.

13 unchanged sentences

Domain names Indefinite

(ab) Impairment of Long-Lived Assets

(aa) Impairment of Long-Lived Assets

The Company evaluates its long-lived assets, including property, equipment and intangible assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

Recoverability of assets held and used is measured by a comparison of the carrying amount of an asset or an asset group to estimated undiscounted future net cash flows expected to be generated by the asset or asset group.

If such evaluation indicates that the carrying amount of the asset or the asset group is not recoverable, any impairment loss would be equal to the amount the carrying value exceeds the fair value.

If such evaluation indicates that the carrying amount of the asset or the asset group is not recoverable, an impairment loss would be equal to the amount the carrying value exceeds the fair value.

The impairment is allocated to the long-lived assets within the asset group on a pro-rata basis using the relative carrying amounts of the assets.

Values of individual long-lived assets are not reduced in excess of their respective fair values.

Carrying amounts of individual long-lived assets are not reduced below their respective fair values.

In the valuation of an asset or an asset group, management must make assumptions regarding estimated future revenue and cash flows to be derived from the respective asset or asset group, discount rates used and other assumptions.

If these estimates or their related assumptions change in the future, the Company may be required to record impairment of these assets.

(ac) Derivatives and Hedging

(ab) Derivatives and Hedging

The Company is exposed to a wide variety of risks arising from its business operations and overall economic conditions.

12 unchanged sentences

The Company’s foreign currency derivative contracts are classified within Level 2 of the fair value hierarchy because the valuation inputs are based on quoted prices and market observable data of similar instruments in active markets, such as currency spot and forward rates.

(ad) Share Repurchases

(ac) Share Repurchases

The Company elected to record the excess of the repurchase price over the par value of the repurchased shares of its Class A common stock in accumulated deficit, along with the associated transaction costs and excise taxes.

Immediately upon repurchase, the shares are retired and returned to the status of unauthorized and unissued.

On August 16, 2022, the Inflation Reduction Act of 2022 (the “IR Act”) was signed into federal law.

The IR Act provides for, among other things, a new U.S.

federal 1% excise tax on certain repurchases of stock by publicly traded U.S.

domestic corporations and certain U.S.

domestic subsidiaries of publicly traded foreign corporations occurring on or after January 1, 2023.

The excise tax is imposed on the repurchasing corporation itself, not its shareholders from which shares are repurchased.

The amount of the excise tax is generally 1% of the fair market value of the shares repurchased at the time of the repurchase.

However, for purposes of calculating the excise tax, repurchasing corporations are permitted to net the fair market value of certain new stock issuances against the fair market value of stock repurchases during the same taxable year.

In addition, certain exceptions apply to the excise tax.

(ae) Fair Value of Financial Instruments

(ad) Fair Value of Financial Instruments

The accounting guidance for fair value provides a framework for measuring fair value, clarifies the definition of fair value, and expands disclosures regarding fair value measurements.

8 unchanged sentences

A financial instrument's categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

The Company applies fair value accounting for all financial instruments on a recurring basis.

The Company applies fair value accounting for all financial instruments measured at fair value on a recurring basis.

The Company's financial instruments, which include cash, restricted cash, cash equivalents, accounts receivable and accounts payable are recorded at their carrying amounts, which approximate their fair values due to their short-term nature.

Marketable securities consist of U.S.

treasury securities, non-U.S government securities, high credit quality corporate debt securities and commercial paper.

treasury securities, non-U.S.

government securities, high credit quality corporate debt securities and commercial paper.

All marketable securities are considered to be available-for-sale and recorded at their estimated fair values.

1 unchanged sentence

In valuing these items, the Company uses inputs and assumptions that market participants would use to determine their fair value, utilizing valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs.

The fair values of the senior notes due 2029 and 2031 (“2029 Notes” and “2031 Notes,” respectively) are determined based on their respective closing prices on the last trading day of the reporting period and are classified as Level 2 in the fair value hierarchy.

The carrying value of the strategic investments, which consist of restricted equity securities of a publicly held company and equity securities of privately held companies, is determined under the measurement alternative on a non-recurring basis adjusting for observable changes in fair value.

The Company does not have a controlling interest nor it can exercise significant influence over any of these entities.

These financial liabilities are not measured at fair value on a recurring basis.

The Company does not have a controlling interest nor can it exercise significant influence over any of these entities.

The Company regularly reviews changes to the rating of its debt securities by rating agencies and monitors the surrounding economic conditions to assess the risk of expected credit losses.

1 unchanged sentence

Impairments are considered to be other than temporary if they are related to deterioration in credit risk or if it is likely that the security will be sold before the recovery of its cost basis.

Realized gains and losses and declines in value deemed to be other than temporary are determined based on the specific identification method and are reported in other expenses, net.

(af) Recently Issued Accounting Guidance, Not yet Adopted

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.

ASU 2022-03 is effective for interim and annual periods beginning after December 15, 2023, with early adoption permitted.

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

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

Realized gains and losses and declines in value deemed to be other than temporary are determined based on the specific identification method and are reported in other (income) expenses, net.

(ae) Recently Adopted Accounting Guidance

In November 2023, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No.

(“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.

The ASU expands segment disclosures by requiring disclosure of significant segment expenses that are regularly provided to the Chief Operating Decision Maker (“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.

1 unchanged sentence

Early adoption is permitted.

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

The Company adopted ASU 2023-07 in the fourth quarter of 2024.

The adoption required certain additional disclosure that the Company made in Note 8 to these consolidated financial statements.

(af) Recently Issued Accounting Guidance, Not yet Adopted

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

2 unchanged sentences

Early adoption is permitted.

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

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.

In November 2024, the FASB issued ASU 2024-03, “ Income Statement-Reporting Comprehensive Income-Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses,” which requires the disaggregation of certain expenses in the notes of the financial statements to provide enhanced transparency into the expense captions presented on the face of the statements of operations.

ASU 2024-03 is effective for annual reporting periods beginning after December 15, 2026, and interim periods beginning after December 15, 2027, and may be applied either prospectively or retrospectively.

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

Fair Value Measurements

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Money market funds $ 207,323 $ — $ — $ — $ 207,323 $ — $ — $ 207,323

Commercial paper 15,059 — — — — 15,059 — 15,059

Treasury bills 2,748 — — — 2,748 — — 2,748

Total included in cash

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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

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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

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Debt Securities

The aggregate fair value of corporate debt securities with unrealized losses is $ 1.5 billion as of December 31, 2023, of which $ 415.2 million have been in an unrealized loss position for more than 12 months and $ 1.1 billion have been 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 December 31, 2023 and 2022 were not significant.

The Company’s primary objective when investing excess cash is preservation of capital, hence the Company’s debt securities primarily consist of U.S.

Treasury Securities, non-U.S government securities, high credit quality corporate debt securities and commercial paper.

Treasury Securities, non-U.S.

government securities, high credit quality corporate debt securities and commercial paper.

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

Interest earned on marketable securities was $ 90.2 million, $ 77.7 million and $ 64.6 million in the years ended December 31, 2024, 2023 and 2022, respectively.

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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.

The equity securities consist of shares of a publicly traded company that were received as consideration in a divestiture transaction described in Note 5 to these consolidated financial statements.

Strategic Investments

As of December 31, 2024 and 2023, the Company held strategic investments with an aggregate carrying value of $ 23.5 million and $ 30.7 million, respectively, recorded as other long-term assets in the accompanying 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 years ended December 31, 2024 and 2022, related to these securities.

In the year ended December 31, 2023, the Company remeasured to fair value one of its strategic investments acquired in 2021 due to an assessed impairment.

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The impairment loss of $ 46.2 million is recorded in other expenses, net, in the accompanying consolidated statement of operations for the year ended December 31, 2023.

There were no other impairments or adjustments recorded in the three years ended December 31, 2023, 2022 and 2021, related to these securities.

Financial Liabilities

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

These fair values are classified as Level 2 in the fair value hierarchy.

Property and Equipment

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

( 1 ) Data center equipment includes $ 33.5 million and $ 72.4 million in assets held under finance leases as of December 31, 2024 and 2023, respectively.

Accumulated depreciation and amortization includes $ 28.6 million and $ 55.9 million of accumulated depreciation for assets held under finance leases as of December 31, 2024 and 2023, respectively.

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The Company capitalized $ 72.5 million, $ 57.2 million and $ 65.4 million in internal‑use software development costs in the years ended December 31, 2024, 2023 and 2022, respectively.

In July 2023, the Company sold 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.

There were no divestitures in the year ended December 31, 2024.

In 2023, the Company sold 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.

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The Company also recorded an additional $ 3.3 million of divestiture-related expenses in the same period.

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

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

The loss on divestiture and related expenses were not significant.

Operating right-of-use assets

In 2022, the Company announced its decision to become a remote-first company whereby employees would have the flexibility to work remotely on a permanent basis.

As part of the new operating strategy, the Company permanently closed several of its offices in 2023 and 2022, which required the Company to reassess its operating right-of-use (“ROU”) assets and the associated leasehold improvements and property and equipment for impairment.

In 2022, the Company adopted a remote-first operating strategy whereby employees work remotely on a permanent basis.

As a result, the Company permanently closed several of its offices in 2023 and 2022, which required reassessment of the operating right-of-use (“ROU”) assets and the associated leasehold improvements and property and equipment for impairment.

The Company determined that the carrying amounts of these assets exceeded their respective fair values.

The Company engaged a third‑party expert to assist with the valuation analysis.

The Company regularly assesses recoverability of all impacted ROU assets and the related long-lived asset categories for indicators of impairment.

The Company regularly assesses recoverability of its ROU assets and the related long-lived asset categories for indicators of impairment.

In the years ended December 31, 2023 and 2022, the Company recorded $ 34.8 million and $ 97.7 million of impairment, respectively, related to its permanently closed offices.

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The trade name intangible asset was not impaired.

No other significant impairments were recorded during the years ended 2023, 2022 or 2021.

No other significant impairments were recorded during the years ended December 31, 2024, 2023 or 2022.

Restructuring Activities

No significant restructuring activities occurred in the year ended December 31, 2024.

In February 2023, the Company announced a workforce reduction plan (the “February 2023 Plan”) that was designed to reduce operating costs, improve operating margins and accelerate profitability.

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For the year ended December 31, 2023, restructuring charges related to the February 2023 Plan were $ 141.1 million, which consisted of $ 130.0 million related to employee severance, benefits and facilitation costs, and $ 11.1 million related to vesting of employee stock based compensation awards.

Furthermore, the restructuring charges consisted of $ 108.9 million related to the Communications reportable segment, $ 9.4 million related to the Segment reportable segment and $ 22.8 million included in corporate costs.

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 consolidated balance sheets:

$ 108.9 million of the restructuring charges related to the Communications reportable segment, $ 9.4 million related to the Segment reportable segment and $ 22.8 million was included in corporate costs.

Workforce Reduction Costs Facilitation Costs Total

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Balance as of December 31, 2023 $ 8,859 $ 394 $ 9,253

The $ 11.1 million expenses related to vesting of the employee stock-based compensation awards is recorded in the additional-paid-in capital in the accompanying consolidated statement of stockholders’ equity.

February 2023 Plan restructuring charges incurred in 2024 were not significant.

No amounts were outstanding as of December 31, 2024 related to this plan.

In December 2023, the Company announced a workforce restructuring plan that was designed to streamline operations and accelerate the Company’s path to profitable growth (the “December 2023 Plan”).

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The September 2022 Plan eliminated approximately 11 % of the Company’s workforce.

In the year ended December 31, 2022, related to the September 2022 Plan, the Company recorded $ 76.6 million of restructuring charges, including a $ 14.3 million expense related to vesting of the employee stock-based compensation awards, in its accompanying consolidated statement of operations.

The restructuring charges consisted of $ 67.4 million related to the Communications reportable segment, $ 1.6 million related to the Segment reportable segment and $ 7.6 million included in corporate costs.

The following table summarizes the Company’s restructuring liability related to the September 2022 Plan that is included in accrued expenses and other current liabilities in the accompanying consolidated balance sheet as of December 31, 2022:

Workforce Reduction Costs Facilitation Costs Total

(In thousands)

Balance as of December 31, 2021 $ — $ — $ —

Restructuring charges 60,553 1,808 62,361

Cash payments ( 60,053 ) ( 1,242 ) ( 61,295 )

Balance as of December 31, 2022 $ 500 $ 566 $ 1,066

September 2022 Plan restructuring charges incurred in 2023 were not significant.

No amounts were outstanding as of December 31, 2023 related to this 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 operated the business.

In the second quarter of 2023, the Company concluded that it had two operating and reportable segments:

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

In the fourth quarter of 2023, the Company further reorganized its business by shifting certain components of the business between its operating segments.

This reorganization did not impact the segment structure of the business.

The impact on the reporting unit structure is described in Note 12.

After the reorganization, the Company’s Data & Applications segment consisted of its Segment and Engage products and, therefore, the reportable segment was renamed from Data & Applications to Twilio Segment (“Segment”).

In the year ended December 31, 2022, the Company recorded $ 76.6 million of restructuring charges, including a $ 14.3 million expense related to vesting of the employee stock-based compensation awards, in its accompanying consolidated statement of operations.

$ 67.4 million of the restructuring charges related to the Communications reportable segment, $ 1.6 million related to the Segment reportable segment and $ 7.6 million was included in corporate costs.

Segment Reporting

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

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

Twilio Communications :

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The Segment 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.

Discrete financial information reviewed by the CODM

In January 2024, the Company’s newly appointed CEO, who is also the CODM, began reviewing segment operating results using non-GAAP income from operations as the measure of segment profitability.

Presented below is the discrete financial information by reportable segment for the years ended December 31, 2023, 2022, and 2021, that reflects management’s current view of the business for performance assessment and resource allocation decisions.

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

The Company’s CEO, who is also the CODM, reviews the operating results by segment using non-GAAP income (loss) from operations as the measure of segment profitability.

The CODM uses this measure of segment profitability to allocate resources and assess performance of each segment by comparing the segment actual results to the comparable results in prior periods and to any internally or externally set expectations.

Presented below is the discrete financial information by reportable segment for the years ended December 31, 2024, 2023, and 2022, that reflects management’s current view of the business and that is regularly provided to the CODM.

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.

Asset information is not reviewed by the CODM on a segment basis.

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, finance and accounting expenses.

2023 2022 2021

(In thousands)

Corporate costs are not allocated to operating segments.

Corporate costs consist of costs that support company-wide processes, 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.

In addition to corporate costs, cost of revenue and operating expenses not allocated to operating segments include stock-based compensation, amortization of acquired intangibles, payroll taxes related to stock-based compensation, charitable contributions and restructuring costs.

Year Ended December 31, 2024

Communications

Segment 295,252 276,234 200,965

Total $ 4,153,945 $ 3,826,321 $ 2,841,839

Non-GAAP income (loss) from operations:

(In thousands)

Revenue $ 4,160,340 $ 297,696 $ 4,458,036

Cost of revenue attributable to segments 2,014,491 79,469 2,093,960

Operating expenses attributable to segments 1,103,800 280,882 1,384,682

Segment non-GAAP income (loss) from operations

$ 1,042,049 $ ( 62,655 ) $ 979,394

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

Total segment non-GAAP income from operations

Corporate costs not allocated to segments

Stock-based compensation ( 613,429 )

Amortization of acquired intangibles ( 111,851 )

Payroll taxes related to stock-based compensation

Charitable contributions

Restructuring costs

Loss from operations

Other expenses, net

Loss before provision for income taxes

Year Ended December 31, 2023

Communications

Segment ( 72,430 ) ( 29,695 ) ( 13,006 )

Corporate costs

(In thousands)

Revenue $ 3,858,693 $ 295,252 $ 4,153,945

Cost of revenue attributable to segments

1,901,275 68,433 1,969,708

Total $ 533,008 $ ( 4,490 ) $ 2,520

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

Total non-GAAP income (loss) from operations

Operating expenses attributable to segments

1,115,428 299,249 1,414,677

Segment non-GAAP income (loss) from operations

$ 841,990 $ ( 72,430 ) $ 769,560

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

Total segment non-GAAP income from operations

Corporate costs not allocated to segments

Stock-based compensation ( 662,842 )

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Acquisition and divestiture related expenses

( 5,555 ) ( 2,621 ) ( 7,449 )

Loss on net assets divested

( 32,277 ) — —

Payroll taxes related to stock-based compensation

( 12,985 ) ( 23,832 ) ( 48,417 )

Charitable contributions

( 17,346 ) ( 9,541 ) ( 31,169 )

Restructuring costs

( 165,733 ) ( 76,636 ) —

Impairment of long-lived assets

Loss from operations

Other expenses, net

Loss before provision for income taxes

$ ( 996,729 )

Year Ended December 31, 2022

Communications

(In thousands)

Revenue $ 3,550,087 $ 276,234 $ 3,826,321

Cost of revenue attributable to segments

1,817,019 51,396 1,868,415

Operating expenses attributable to segments

1,414,388 254,533 1,668,921

Segment non-GAAP income (loss) from operations

$ 318,680 $ ( 29,695 ) $ 288,985

Reconciliation of total segment non-GAAP loss from operations to loss from operations:

Total segment non-GAAP loss from operations

Corporate costs not allocated to segments

Stock-based compensation ( 784,285 )

Amortization of acquired intangibles ( 206,181 )

Acquisition and divestiture related expenses

Payroll taxes related to stock-based compensation

Charitable contributions

Restructuring costs

Impairment of long-lived assets

Loss from operations

( 1,205,308 )

Other expenses (income), net ( 120,188 ) ( 38,324 ) ( 45,345 )

Loss before (provision for) benefit from income taxes

Other expenses, net

Loss before provision for income taxes

$ ( 1,243,632 )

Depreciation and amortization expenses included in non-GAAP income from operations for the Communications reportable segment was $ 74.1 million, $ 61.9 million and $ 53.5 million in the years ended December 31, 2023, 2022 and 2021, respectively.

Depreciation and amortization expenses, except for amortization of acquired intangibles, that are included in non-GAAP income from operations for the Communications reportable segment was $ 71.9 million, $ 74.1 million and $ 61.9 million in the years ended December 31, 2024, 2023 and 2022, respectively.

Amortization of deferred commissions included in non-GAAP income from operations for the Communications reportable segment was $ 60.7 million, $ 60.0 million and $ 47.7 million in the years ended December 31, 2024, 2023 and 2022, respectively.

Depreciation and amortization expenses included in non-GAAP loss from operations for the Segment reportable segment was $ 13.7 million, $ 6.1 million and $ 2.6 million in the years ended December 31, 2023, 2022 and 2021, respectively.

Depreciation and amortization expenses, except for amortization of acquired intangibles, that are included in non-GAAP loss from operations for the Segment reportable segment was $ 18.1 million, $ 13.7 million and $ 6.1 million in the years ended December 31, 2024, 2023 and 2022, respectively.

Amortization of deferred commissions included in non-GAAP loss from operations for the Segment reportable segment was $ 15.7 million, $ 12.9 million and $ 10.3 million in the years ended December 31, 2024, 2023 and 2022, respectively.

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As of December 31, 2024, these contracts had maturities of up to 1.4 years.

Gains and losses associated with these foreign currency forward contracts are as follows:

Condensed Consolidated Statement of Operations and Statement of Comprehensive Loss Year Ended

2023 2022 2021

(In thousands)

Gains recognized in OCI

Net change in market value of effective foreign currency forward exchange contracts $ 898 $ 556 $ 294

Gains (losses) recognized in income due to instruments maturing

Cost of revenue $ 2,099 $ ( 34,862 ) $ ( 7,545 )

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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Right-of-Use Assets and Lease Liabilities

The Company has entered into various operating lease agreements for office space and data centers and finance lease agreements for data centers, office equipment and furniture.

The Company has entered into various operating lease agreements for office space and finance lease agreements for data centers, office equipment and furniture.

As of December 31, 2024, the Company had various leased properties with remaining lease terms from 0.1 years to 4.8 years, some of which include options to extend the leases for up to 5.0 years.

As a result of the office closures described in Note 6, the Company impaired several of its ROU assets related to office leases that will no longer be used to support its ongoing operations.

In the years ended December 31, 2023 and 2022, the Company recorded $ 34.8 million and $ 97.7 million impairment expense, respectively, related to these office closures, of which $ 24.8 million and $ 72.8 million, respectively, related to the affected ROU assets.

During 2023 and 2022, as a result of the office closures described in Note 6, the Company impaired several of its ROU assets related to office leases that would no longer be used to support its ongoing operations.

The remaining impairment expense related to the associated assets in the property, plant and equipment categories.

For the years ended December 31, 2023, 2022 and 2021, the Company did not have significant sublease income related to any of its subleased office leases.

In the year ended December 31, 2024, there was no impairment expense related to office closures.

For the years ended December 31, 2024, 2023 and 2022, the Company did not have significant sublease income related to any of its subleased offices.

Operating lease costs recorded in the accompanying consolidated statements of operations were $ 25.4 million, $ 35.7 million and $ 57.8 million for the years ended December 31, 2024, 2023 and 2022, respectively.

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2025 $ 38,474

Thereafter 5,934

Total lease payments 129,559

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Equity Method Investment

In May 2022, the Company acquired 44.6 % equity interests in Syniverse Corporation (“Syniverse”) for $ 750.0 million in cash.

In May 2022, the Company acquired 44.6 % of the equity interests in Syniverse Corporation (“Syniverse”) for $ 750.0 million in cash.

The Company determined that it does not have a controlling financial interest in Syniverse but does exercise significant influence and, therefore, the investment was accounted for under the equity method.

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Total basis difference attributable to the identifiable intangible assets $ 530,741

As of December 31, 2023, the Company held 44.0 % equity interests in Syniverse and the carrying amount of its equity method investment recorded in the accompanying consolidated balance sheet was $ 593.6 million.

As of December 31, 2023, the Company’s net excess investment basis was $ 451.6 million related to its proportionate share of the identifiable intangible assets of the investee, $ 41.2 million related to the associated deferred tax liability and $ 623.8 million related to the equity method goodwill.

As of December 31, 2022, the Company held 44.5 % equity interests in Syniverse and the carrying amount of its equity method investment recorded in the accompanying consolidated balance sheet was $ 699.9 million.

As of December 31, 2022, the Company’s net excess investment basis was $ 508.9 million related to its proportionate share of the identifiable intangible assets of the investee, $ 41.3 million related to the associated deferred tax liability and $ 623.8 million related to the equity method goodwill.

In the years ended December 31, 2023 and 2022, the Company recorded its proportionate share of the investee's net operating results and the amortization of the basis difference of $ 121.9 million and $ 35.3 million, respectively, as part of other expenses, net in the accompanying consolidated statements of operations.

The Company also recorded $ 15.6 million of its proportionate share of the investee’s other comprehensive income for the year ended December 31, 2023 and $ 14.9 million of its proportionate share of the investee’s other comprehensive loss for the year ended December 31, 2022 in the accompanying

consolidated statements of other comprehensive income (loss).

Results of operations and other comprehensive income (loss) were recorded on a 90-day lag.

In conjunction with this investment, the Company and Syniverse entered into a wholesale agreement, pursuant to which Syniverse will process, route and deliver application-to-person messages originating and/or terminating between the Company’s customers and mobile network operators.

The values of the transactions that occurred between the Company and Syniverse were $ 143.7 million for the year ended December 31, 2023 and $ 89.6 million for the period from the investment closing date on May 13, 2022 through December 31, 2022.

In the years ended December 31, 2024, 2023 and 2022, the Company recorded $ 108.5 million, $ 121.9 million and $ 35.3 million, respectively, of its proportionate share of the investee's net operating results, the amortization of the basis difference and dilution loss as part of other expenses, net, in the accompanying consolidated statements of operations.

The Company also recorded $ 0.7 million and $ 15.6 million of its proportionate share of the investee’s other comprehensive income for the years ended December 31, 2024 and 2023, respectively, and $ 14.9 million of its proportionate share of the investee’s other comprehensive loss for the year ended December 31, 2022, in the accompanying consolidated statements of other comprehensive loss.

Results of operations and other comprehensive loss were recorded on a 90-day lag.

As of December 31, 2024 and 2023, the Company held 43.8 % and 44.0 %, respectively, of the equity interests in Syniverse.

The unamortized net excess investment basis was $ 353.3 million and $ 410.4 million, respectively.

The carrying amount of the investment in the accompanying consolidated balance sheets was $ 485.8 million and $ 593.6 million as of December 31, 2024 and 2023, respectively.

In conjunction with this investment, the Company and Syniverse 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.

The values of the transactions that occurred between the Company and Syniverse were $ 145.0 million and $ 143.7 million for the years ended December 31, 2024 and 2023, respectively, and $ 89.6 million for the period from the investment closing date on May 13, 2022, through December 31, 2022.

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

Summarized financial information of Syniverse is presented below on a one-month lag.

The investee’s fiscal year end is November 30.

As of November 30,

(In thousands)

Current assets

$ 225,975 $ 195,426

Noncurrent assets

$ 2,344,658 $ 2,368,645

Current liabilities

$ 232,522 $ 200,541

Noncurrent liabilities

$ 1,176,332 $ 1,153,801

Non controlling interest

$ 6,027 $ 6,380

Year Ended November 30,

2024 2023 2022 (1)

(In thousands)

Revenue $ 819,164 $ 739,317 $ 753,913

Cost of operations (excluding depreciation and amortization)

$ 474,081 $ 430,140 $ 466,340

Income (loss) from operations

$ 113,950 $ 67,870 $ ( 147,166 )

$ ( 38,849 ) $ ( 89,096 ) $ ( 312,773 )

Net loss attributable to Syniverse Corporation

$ ( 40,917 ) $ ( 90,770 ) $ ( 314,379 )

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(1) The Company invested in the investee in May 2022.

It is impracticable to provide audited financial information for a partial fiscal year due to its unavailability.

Goodwill and Intangible Assets

The business reorganization activities described in Note 8 impacted the Company’s reporting unit structure and, as a result, in 2023 the Company had multiple reporting units.

These changes required the Company to reallocate goodwill to its newly formed reporting units and test the goodwill for impairment on the reporting unit level immediately before and immediately after each reorganization.

During 2023, as a result of business reorganization events, the Company shifted from a single reporting unit structure to a multiple reporting unit structure.

The Company reallocated goodwill to its newly formed reporting units and tested goodwill for impairment on the reporting unit level immediately before and immediately after each reorganization.

The Company engaged a third-party expert to assist in the valuation analysis.

The Company concluded that its goodwill was not impaired immediately before and immediately after the reorganizations.

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 various assumptions that the Company believes are reasonable under then current circumstances.

Under the income approach, the Company determines the fair value of a reporting unit based on the present value of estimated future cash flows using the cash flow projections prepared by management.

The Company concluded that its goodwill was not impaired immediately before and immediately after each reorganization.

To allocate goodwill to the newly formed reporting units in 2023, the Company estimated 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 various assumptions that the Company believes were reasonable under then current circumstances.

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

future cash flows using the cash flow projections prepared by management.

The market approach estimates the fair value based on market multiples of 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.

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

The following table presents the goodwill allocated to the Company’s reportable segments as of December 31, 2024 and 2023, and the changes during the period:

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

Goodwill additions related to 2021 acquisitions — — 25,748

Measurement period and other adjustments — — ( 4,761 )

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

Foreign currency adjustments 26

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

Reallocation to segments in 2023 (1)

$ 4,978,094 $ 306,085 —

2 unchanged sentences

( 41,164 ) — ( 41,164 )

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

656,964 ( 656,964 ) —

Balance as of December 31, 2023 $ 4,937,181 $ 306,085 $ 5,243,266

____________________________________

( 1 ) Represents reallocation of goodwill as a result of the reorganization activities, as described in Note 8.

(2) Represents goodwill related to the divestitures of the ValueFirst business and IoT asset group, as described in Note 5.

( 1 ) Represents reallocation of goodwill as a result of the change in reporting unit structure in 2023.

(2) Represents goodwill related to the divestitures of the ValueFirst business and IoT asset group in 2023, as described in Note 5.

There was no goodwill activity during the year ended December 31, 2024.

As of December 31, 2024, 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.

Intangible assets

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Trade names 25,968 ( 25,014 ) 954

Order backlog 10,000 ( 10,000 ) —

Patent 3,968 ( 1,096 ) 2,872

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Total $ 821,562 $ ( 583,059 ) $ 238,503

____________________________________

* As a result of the impairment described in Note 6, the developed technology cost basis and the related accumulated amortization decreased by $ 381.1 million and $ 171.8 million, respectively.

** As a result of the impairment described in Note 6, the customer relationship cost basis and the related accumulated amortization decreased by $ 174.0 million and $ 97.6 million, respectively.

As of December 31, 2023

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Amortization expense was $ 112.0 million, $ 192.5 million and $ 206.4 million for the years ended December 31, 2024, 2023 and 2022, respectively.

There was no impairment related to intangible assets in the year ended December 31, 2024.

In the year ended December 31, 2023, the Company recorded an impairment charge related to certain of its intangible assets, as described in Note 6.

5 unchanged sentences

Total $ 233,288

Accrued Expenses and Other Current Liabilities

Balance Sheet Components

Prepaid expenses and other current assets consist of the following:

As of December 31,

(In thousands)

Prepaid expenses $ 333,911 $ 196,850

Other current assets 140,449 132,354

Total prepaid expenses and other current assets

$ 474,360 $ 329,204

Accrued expenses and other current liabilities consist of the following:

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Accrued payroll and related $ 76,708 $ 77,593

Company-wide bonus program liability 109,776 —

Accrued bonus and commission 21,585 17,345

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Sales and other taxes payable 79,731 70,913

ESPP contributions 6,130 8,499

Finance lease liability 8,489 11,871

Restructuring liability 318 29,086

Employee sabbatical benefit accrual (1)

Accrued other expense 68,829 73,653

Total accrued expenses and other current liabilities $ 530,686 $ 424,311

____________________________________

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

The accrued liability as of December 31, 2023 represents the accumulated benefit balance for the employees who remain eligible under this program through its termination date.

Long-Term Debt

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The 2029 Notes and 2031 Notes will mature on March 15, 2029 and March 15, 2031, respectively.

Interest payments are payable semi-annually in arrears on March 15 and September 15 of each year, commencing on September 15, 2021.

Interest payments are payable semi-annually in arrears on March 15 and September 15 of each year.

The aggregate net proceeds from offering of the Notes were approximately $ 984.7 million after deducting underwriting discounts and issuance costs paid by the Company.

The Company may voluntarily redeem the 2029 Notes, in whole or in part, under the following circumstances:

(1) at any time prior to March 15, 2024 with the net cash proceeds received by the Company from an equity offering at a redemption price equal to 103.625 % of the principal amount, provided the aggregate principal amount of all such redemptions does not exceed 40 % of the original aggregate principal amount of the 2029 Notes.

Such redemption shall occur within 180 days after the closing of an equity offering and at least 50 % of the then-outstanding aggregate principal amount of the 2029 Notes shall remain outstanding, unless all 2029 Notes are redeemed concurrently;

(2) at any time prior to March 15, 2024 at 100 % of the principal amount, plus a “make-whole” premium;

As of December 31, 2024, the Company may voluntarily redeem the 2029 Notes, in whole or in part, under the following circumstances:

(1) at any time on or after March 15, 2024 at a prepayment price equal to 101.813 % of the principal amount;

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in each case, the redemption will include the accrued and unpaid interest, as applicable.

The Company may voluntarily redeem the 2031 Notes, in whole or in part, under the following circumstances:

(1) at any time prior to March 15, 2024 with the net cash proceeds received by the Company from an equity offering at a redemption price equal to 103.875 % of the principal amount, provided the aggregate principal amount of all such redemptions does not to exceed 40 % of the original aggregate principal amount of the 2031 Notes.

Such redemption shall occur within 180 days after the closing of an equity offering and at least 50 % of the then-outstanding aggregate principal amount of the 2031 Notes shall remain outstanding, unless all 2031 Notes are redeemed concurrently;

As of December 31, 2024, the Company may voluntarily redeem the 2031 Notes, in whole or in part, under the following circumstances:

(1) at any time prior to March 15, 2026 at 100 % of the principal amount, plus a “make-whole” premium;

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Revenue by Geographic Area and Groups of Similar Products

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:

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543,117 511,728 474,790

Email and Marketing Campaigns

488,271 440,185 399,314

5 unchanged sentences

Total $ 4,458,036 $ 4,153,945 $ 3,826,321

____________________________________

( 1 ) Prior year amounts were reclassified to conform to the current year presentation.

The current year presentation follows the

Company’s reportable segment structure, as described further in Note 8.

Commitments and Contingencies

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Refer to Note 10 for additional detail on the Company's operating lease commitments.

Additionally, the Company has contractual commitments with its cloud infrastructure providers, network service providers and other vendors that are noncancellable and expire within one to three years .

In the year ended December 31, 2023, the Company entered into several such agreements with terms of up to three years for a total purchase commitment of $ 103.8 million.

In the year ended December 31, 2024, the Company entered into several such agreements with terms of up to four years for a total purchase commitment of $ 182.5 million.

Future minimum payments under these noncancellable purchase commitments are summarized in the table below.

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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.

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 consolidated statements of operations.

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 parties agreed to a settlement agreement that was approved by San Francisco’s Board of Supervisors and Mayor on November 7, 2023 and November 9, 2023, respectively, pursuant to which San Francisco paid the Company $ 18.0 million in November 2023 in settlement of the Company’s claims.

The related impacts to the consolidated balance sheet as of December 31, 2023 and statement of operations for the year ended December 31, 2023 were not significant.

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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 can 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.

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 management believes it had nexus and the sourcing of revenues to those jurisdictions.

The Company continues to remain in discussions with certain jurisdictions regarding its prior sales and other taxes that it may owe.

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 December 31, 2023, the liabilities recorded for the non-income-based taxes were $ 18.0 million for domestic jurisdictions and $ 22.2 million for jurisdictions outside of the United States.

As of December 31, 2024, the liabilities recorded for non-income-based taxes were $ 19.3 million for domestic jurisdictions and $ 22.0 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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As of December 31, 2024 and 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 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 par value of $ 0.001 per share.

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.

As of December 31, 2022, the Company had authorized 1,000,000,000 shares of Class A common stock and 100,000,000 shares of Class B common stock, each par value of $ 0.001 per share.

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.

As of December 31, 2024 and 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 par value of $ 0.001 per share.

As of December 31, 2024 and 2023, 152,610,697 and 181,945,771 shares of Class A common stock, respectively, and no shares of Class B common stock were issued and outstanding.

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

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Total 53,064,084 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 the 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.

During the year ended December 31, 2023, the Company repurchased 11.3 million shares of its Class A common stock for an aggregate purchase price of $ 672.1 million.

As of December 31, 2023, approximately $ 327.9 million of the originally authorized amount remained available for future repurchases.

Public Equity Offerings

In February 2021, the Company completed a public equity offering in which it sold 4,312,500 shares of its Class A common stock at a public offering price of $ 409.60 per share.

The Company received total proceeds of $ 1.8 billion, net of underwriting discounts and offering expenses paid by the Company.

Share Repurchase Programs

In February 2023, the board of directors of the Company authorized the repurchase of up to $ 1.0 billion in aggregate value of the Company’s outstanding Class A common stock, and in March 2024, the board of directors authorized the repurchase of an additional $ 2.0 billion in aggregate value of the Company’s outstanding Class A common stock.

Repurchases under this program could 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 had discretion in determining the conditions under which shares may be repurchased from time to time.

This repurchase program expired on December 31, 2024.

During the years ended December 31, 2024 and 2023, the Company repurchased 36.8 million shares and 11.3 million shares of its Class A common stock, respectively, for an aggregate purchase price of $ 2.3 billion and $ 672.1 million, respectively.

As of December 31, 2024, the Company completed repurchases of $ 3.0 billion in aggregate value of its Class A common stock, as originally authorized.

In January 2025, the board of directors of the Company authorized a new share repurchase program to repurchase up to $ 2.0 billion in aggregate value of the Company’s outstanding Class A common stock with the repurchase terms similar to the previous program.

The new program expires on December 31, 2027.

Stock-Based Compensation

The following are descriptions for stock plans that govern a significant amount of outstanding equity awards as of December 31, 2024:

2008 Stock Option Plan

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The Company’s 2016 Stock Option and Incentive Plan (the “2016 Plan”) became effective on June 21, 2016.

The 2016 Plan provides for the grant of ISOs, NSOs, restricted stock, RSUs, stock appreciation rights, unrestricted stock awards, performance share awards, dividend equivalent rights and cash-based awards to employees, directors and consultants of the Company.

The 2016 Plan provides for the grant of ISOs, NSOs, restricted stock awards, RSUs, stock appreciation rights, unrestricted stock awards, performance share awards, dividend equivalent rights and cash-based awards to employees, directors and consultants of the Company.

A total of 11,500,000 shares of the Company’s Class A common stock were initially reserved for issuance under the 2016 Plan.

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Under the 2016 Plan, the stock options are granted at a price per share not less than 100 % of the fair market value per share of the underlying common stock on the date of grant.

SendGrid 2009, 2012 and 2017 Stock Incentive Plans

In connection with its acquisition of SendGrid, the Company assumed and replaced all stock options and restricted stock units of the continuing employees issued under SendGrid’s 2009, 2012 and 2017 Stock Incentive Plans that were unvested and outstanding on the date of acquisition.

The assumed equity awards continue to vest and are governed by the provisions of their respective plans.

Additionally, the Company assumed shares of SendGrid common stock that were reserved and available for issuance under SendGrid's 2017 Equity Incentive Plan, on an as converted basis.

These shares were utilized for equity grants under the Company’s 2016 Plan in the post-acquisition period, to the extent permitted by New York Stock Exchange rules.

Segment 2013 Stock Incentive Plan

In connection with its acquisition of Segment, the Company assumed and replaced all stock options and restricted stock units of the continuing employees issued under Segment’s 2013 Stock Incentive Plan (“Segment Plan”) that were unvested and outstanding on the acquisition date.

The assumed equity awards continue to vest and are governed by the provisions of the Segment Plan.

Zipwhip 2008 Stock Plan and 2018 Equity Incentive Plan

In connection with its acquisition of Zipwhip, the Company assumed and replaced all stock options and restricted stock units of the continuing employees issued under Zipwhip’s Amended and Restated 2008 Stock Plan and 2018 Equity Incentive Plan (“Zipwhip Plans”) that were unvested and outstanding on the acquisition date.

The assumed equity awards continue to vest and are governed by the provisions of the Zipwhip Plans.

Under all plans, stock options generally expire 10 years from the date of grant and vest over periods determined by the board of directors.

The vesting period for stock options and restricted stock units is generally four years from the date of grant.

For existing employees and, effective in 2022, for new-hires the stock options and restricted stock units vest in equal monthly and quarterly installments, respectively, over the service period.

2016 Employee Stock Purchase Plan

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These available shares automatically increase each January 1, beginning on January 1, 2017, by the lesser of 1,800,000 shares of the Company's Class A common stock, 1 % of the number of shares of the Company’s Class A and Class B common stock outstanding on the immediately preceding December 31 or such lesser number of shares as determined by the Company’s compensation committee.

On each of January 1, 2023 and 2022, the shares available for grant under the 2016 ESPP were automatically increased by 1,800,000 shares.

On January 1, 2024 and 2023, the shares available for grant under the 2016 ESPP were automatically increased by 1,800,000 shares.

The 2016 ESPP allows eligible employees to purchase shares of the Company’s Class A common stock at a discount of 15 % through payroll deductions of their eligible compensation, subject to any plan limitations.

The 2016 ESPP provides for separate six-month offering periods beginning in May and November of each year.

On each purchase date, eligible employees purchase the Company’s stock at a price per share equal to 85 % of the lesser of (i) the fair market value of the Company’s Class A common stock on the offering date or (ii) the fair market value of the Company’s Class A common stock on the purchase date.

On each purchase date, eligible employees purchase shares of the Company’s Class A common stock at a price per share equal to 85 % of the lesser of (i) the fair market value of the Company’s Class A common stock on the offering date or (ii) the fair market value of the Company’s Class A common stock on the purchase date.

As of December 31, 2024, total unrecognized compensation cost related to the 2016 ESPP was not significant.

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Unvested RSUs as of December 31, 2024 18,386,271 $ 71.96 $ 1,394,966

In March 2022, the Company granted 919,289 shares of performance-based restricted stock units (“PSU”) to certain of its executive employees.

These awards activity is included in the table above.

In 2024, the Company granted 516,626 shares of PSUs to certain of its executive employees.

These awards are included in the table above.

The awards 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 period, which expires on December 31, 2026.

The final vesting determination will be made by the Company’s Compensation Committee subsequent to the completion of the performance period.

At the end of the vesting period the number of shares actually issued may range from 0 % to 200 % of the target based on levels of performance.

In March 2022, the Company granted 919,289 shares of PSUs to certain of its executive employees.

These awards are included in the table above.

The PSUs were granted with a grant date fair value per share of $ 157.44 and an aggregate grant date fair value of $ 144.7 million.

The Company estimated the fair value of these awards based on the closing price of its Class A common stock on the date of grant.

Each PSU award consisted of three tranches that vest separately over distinct service periods if its respective performance targets, as defined in the grant agreements, are achieved in the respective periods.

The final vesting is determined by the Company’s Compensation Committee subsequent to the completion of the vesting period.

Each PSU award consisted of three tranches that would vest separately over distinct service periods if the respective performance conditions, as defined in the grant agreements, were met.

The final vesting determination is made by the Company’s Compensation Committee subsequent to the completion of the performance period.

The vesting of the first tranche was based on achievement of revenue growth targets with respect to the year ended December 31, 2022.

1 unchanged sentence

If performance targets are not achieved, the related tranches are forfeited.

Vesting of these performance-based restricted stock unit awards can range up to 100 % above the target based on levels of performance and is recorded in stock-based compensation expense in the year during which each tranche vests.

Vesting of these PSUs can range up to 100 % above the target based on levels of performance and is recorded in stock-based compensation expense in the year during which each tranche vests.

As of December 31, 2024, total unrecognized compensation cost related to unvested RSUs was $ 1.2 billion, which will be amortized over a weighted-average period of 2.5 years.

Valuation Assumptions

The Company did no t grant stock options in the year ended December 31, 2023.

The Company used the following assumptions in the Black-Scholes option pricing model to estimate the fair value of the employee stock options:

Year Ended December 31,

Employee Stock Options:

Fair value of common stock $ 85.17

$ 268.55 - $ 409.21

Expected term (in years) 6.02

Expected volatility 61.6 %

42.9 % - 61.5 %

Risk-free interest rate 3.3 %

0.1 % - 1.4 %

Dividend rate — %

The Company used the following assumptions in the Black-Scholes option pricing model to estimate the fair value of the purchase rights issued under the 2016 ESPP:

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5.3 % - 5.4 %

1.5 % - 4.5 %

Dividend rate — %

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Unvested restricted stock units issued and outstanding (1)

18,386,271 18,755,538 15,414,997

Shares of Class A common stock reserved for Twilio.org 353,633 442,041 530,449

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Total 20,327,778 21,381,913 19,076,899

The following table presents domestic and foreign components of loss before income taxes for the periods presented:

____________________________________

(1) The number of PSUs that will ultimately vest may increase or decrease the number of shares that will be issued at the end of the performance period.

The following table presents domestic and foreign components of loss before provision for income taxes for the periods presented:

Year Ended December 31,

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International ( 129,595 ) ( 180,640 ) ( 222,424 )

Loss before (provision for) benefit from income taxes

Loss before provision for income taxes

$ ( 88,613 ) $ ( 996,729 ) $ ( 1,243,632 )

Provision for (benefit from) income taxes consists of the following:

Provision for income taxes consists of the following:

Year Ended December 31,

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Total ( 1,982 ) ( 16,742 ) ( 12,965 )

Provision for (benefit from) income taxes $ 18,712 $ 12,513 $ ( 11,029 )

Provision for income taxes $ 20,790 $ 18,712 $ 12,513

The following table presents a reconciliation of the statutory federal tax rate and the Company's effective tax rate:

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Foreign rate differential ( 67 ) 1 ( 2 )

Permanent book vs.

tax differences 8 — —

Change in valuation allowance 32 ( 23 ) ( 17 )

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Lease liability 30,697 44,682

Unrealized losses on marketable securities — 32,108

Investments and other basis differences 81,248 51,368

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Deferred commissions ( 42,313 ) ( 50,703 )

Net deferred tax asset (liability)

Net deferred tax asset

$ 14,112 $ 15,171

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State net operating loss carryforwards $ 2,390,636 Various dates beginning in 2026

State tax credits $ 120,300 Indefinite

State tax credits $ 125,282 Various dates beginning in 2029

Foreign net operating loss carryforwards $ 846,118 Indefinite

A limitation may apply to the use of the net operating loss and credit carryforwards, under provisions of the Internal Revenue Code of 1986, as amended, and similar state tax provisions that are applicable if the Company experiences an “ownership change.” An ownership change may occur, for example, as a result of issuance of new equity.

A limitation may apply to the use of the federal and state net operating loss and credit carryforwards, under provisions of the Internal Revenue Code of 1986, as amended, and similar state tax provisions that are applicable if the Company experiences an “ownership change.” An ownership change may occur, for example, as a result of issuance of new equity.

Should these limitations apply, the carryforwards would be subject to an annual limitation, resulting in a potential reduction in the gross deferred tax assets before considering the valuation allowance.

The Company's accounting for deferred taxes involves the evaluation of a number of factors concerning the realizability of its net deferred tax assets.

The Company's accounting for deferred taxes involves the evaluation of a number of factors related to the realizability of its net deferred tax assets.

The Company primarily considered such factors as its history of operating losses, the nature of the Company's deferred tax assets, and the timing, likelihood and amount, if any, of future taxable income during the periods in which those temporary differences and carryforwards become deductible.

At present, the Company does not believe that it is more likely than not that the federal, state and foreign net deferred tax assets will be realized, and accordingly, a valuation allowance has been established.

The valuation allowance increased by approximately $ 176.6 million and $ 220.5 million during the years ended December 31, 2023 and 2022, respectively.

At present, the Company does not believe that it is more likely than not that the federal, state and certain foreign net deferred tax assets will be realized, and accordingly, a valuation allowance has been established.

The valuation allowance decreased by approximately $ 45.6 million during the year ended December 31, 2024, and increased by approximately $ 176.6 million during the year ended December 31, 2023.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

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The remaining amount would be offset by the reversal of related deferred tax assets which are subject to a full valuation allowance.

The Company recognizes interest and penalties, if any, related to uncertain tax positions in its income tax provision.

As of December 31, 2023, 2022 and 2021, such amounts are not significant.

The Company does not anticipate any significant changes within 12 months of December 31, 2024, in its uncertain tax positions that would be material to its consolidated financial statements taken as a whole because nearly all of the unrecognized tax benefit has been offset by a deferred tax asset, which has been reduced by a valuation allowance.

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As of December 31, 2024, the tax years 2008 through the current period remain open to examination by the major jurisdictions in which the Company is subject to tax.

Years outside the normal statute of limitation remain open to audit by tax authorities due to tax attributes generated in those early years, which have been carried forward and may be audited in subsequent years when utilized.

Fiscal years outside the normal statute of limitation remain open to audit by tax authorities due to tax attributes generated in those early years, which have been carried forward and may be audited in subsequent years when utilized.

The Company is fully reserved for all open U.S.

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As a result of this decision, the Company's gross unrecognized tax benefits increased to reflect the impact of including share-based compensation in cost-sharing arrangements.

On July 22, 2019, Altera filed a petition for a rehearing before the full Ninth Circuit and the request was denied on November 12, 2019.

On February 10, 2020, Altera filed a petition to appeal the decision to the Supreme Court and on June 22, 2020 the Supreme Court denied the petition.

The Company will continue to monitor future developments related to this matter and their potential effects on its consolidated financial statements.

There is no impact on the Company’s effective tax rate for years ended December 31, 2024 and 2023 due to a full valuation allowance against its deferred tax assets.

We will continue to monitor future developments and their potential effects on our consolidated financial statements.

The provision for and benefit from income taxes recorded in the years ended December 31, 2023 and 2022, respectively, consist primarily of income taxes, withholding taxes in foreign jurisdictions in which the Company conducts business and the tax benefit related to the release of valuation allowance from acquisitions.

The Company’s U.S.

operations have been in a loss position and the Company maintains a full valuation allowance against its U.S.

The provision for income taxes recorded in the years ended December 31, 2024 and 2023, respectively, consists primarily of income taxes and withholding taxes in jurisdictions in which the Company conducts business.

Due to a history of losses in the U.S., the Company maintains a full valuation allowance against its U.S.

deferred tax assets.

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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-K

Item 8. Financial Statements and Supplementary Data