TWILIO INC 10-K

Item 8. Financial Statements and Supplementary Data INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Reports of Independent Registered Public Accounting Firm (PCAOB ID: 185 ) 68 Consolidated Balance Sheets 70 Consolidated Statements of Operations 71 Consolidated Statements of Comprehensive Loss 72 Consolidated Statements of Stockholders' Equity 73 Consolidated Statements of Cash Flows 76 Notes to Consolidated Financial Statements 77 67 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and Board of Directors Twilio Inc.: Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting We have audited the accompanying consolidated balance sheets of Twilio Inc. and subsidiaries (the Company) as of December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive loss, stockholders’ equity, and cash flows for each of the years in the three-year period ended December 31, 2024, and the related notes (collectively, the consolidated financial statements). We also have audited the Company’s internal control over financial reporting as of December 31, 2024, based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2024 and 2023, and the results of its operations and its cash flows for each of the years in the three-year period ended December 31, 2024, in conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2024 based on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission. 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 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. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects. Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. 68 Table of Contents Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the consolidated financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of a critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Evaluation of the sufficiency of audit evidence over revenue recognition As discussed in Note 2(e) to the consolidated financial statements, the Company's revenue is derived from usage and non-usage-based fees earned from customers accessing the Company's cloud-based platform. As of December 31, 2024, the Company recorded $4.5 billion in revenues, a portion of which related to Programmable Messaging and Programmable Voice APIs. The Company’s revenue recognition process is highly automated, and revenue is recorded within the Company’s general ledger through reliance on customized and proprietary information technology (IT) systems. We identified the evaluation of the sufficiency of audit evidence over revenue recognition related to the Company’s Programmable Messaging and Programmable Voice APIs as a critical audit matter. This matter required especially subjective auditor judgment because of the large number of information technology (IT) applications involved in the revenue recognition process. Auditor judgment was required in determining the nature and extent of audit evidence obtained over these information systems that process revenue transactions. Involvement of IT professionals with specialized skills and knowledge was required to assist with the performance and evaluation of certain procedures and determination of IT applications subject to testing. The following are the primary procedures we performed to address this critical audit matter. We applied auditor judgment to determine the nature and extent of procedures to be performed over revenue recognition. We evaluated the design and tested the operating effectiveness of certain internal controls related to the Company’s Programmable Messaging and Programmable Voice revenue recognition process. We involved IT professionals with specialized skills and knowledge, who assisted in testing controls related to the Company’s general information technology and application controls related to the systems utilized within the Company’s Programmable Messaging and Programmable Voice revenue recognition process. For a sample of customer agreements, we compared the pricing reflected in the Company’s revenue IT system to the contractually agreed upon pricing with the customer. For a sample of revenue transactions, we compared the amounts recognized for consistency with underlying documentation, including contracts with customers. We assessed the recorded revenue by comparing revenue to underlying cash receipts. We evaluated credits issued after year end to assess the revenue recorded within the period. In addition, we evaluated the overall sufficiency of audit evidence obtained by assessing the results of procedures performed, including appropriateness of the nature and extent of such evidence. /s/ KPMG LLP We have served as the Company’s auditor since 2013. San Francisco, California February 26, 2025 69 Table of Contents TWILIO INC. Consolidated Balance Sheets As of December 31, 2024 2023 (In thousands, except share and per share amounts) ASSETS Current assets: Cash and cash equivalents $ 421,297 $ 655,931 Short-term marketable securities 1,963,102 3,356,064 Accounts receivable, net 588,540 562,773 Prepaid expenses and other current assets 474,360 329,204 Total current assets 3,447,299 4,903,972 Property and equipment, net 191,042 209,639 Operating right-of-use assets 53,405 73,959 Equity method investment 485,835 593,582 Intangible assets, net 238,503 350,490 Goodwill 5,243,266 5,243,266 Other long-term assets 206,122 234,799 Total assets $ 9,865,472 $ 11,609,707 LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 100,169 $ 119,615 Accrued expenses and other current liabilities 530,686 424,311 Deferred revenue and customer deposits 155,680 144,499 Operating lease liability, current 33,685 49,872 Total current liabilities 820,220 738,297 Operating lease liability, noncurrent 85,875 120,770 Long-term debt, net 990,587 988,953 Other long-term liabilities 15,824 29,135 Total liabilities 1,912,506 1,877,155 Commitments and contingencies (Note 17) Stockholders' equity: Preferred stock, $ 0.001 par value, 100,000,000 shares authorized, none issued — — 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 153 182 Additional paid-in capital 15,476,124 14,797,723 Accumulated other comprehensive (loss) income ( 1,301 ) 619 Accumulated deficit ( 7,522,010 ) ( 5,065,972 ) Total stockholders’ equity 7,952,966 9,732,552 Total liabilities and stockholders’ equity $ 9,865,472 $ 11,609,707 See accompanying notes to consolidated financial statements . 70 Table of Contents TWILIO INC. Consolidated Statements of Operations Year Ended December 31, 2024 2023 2022 (In thousands, except share and per share amounts) Revenue $ 4,458,036 $ 4,153,945 $ 3,826,321 Cost of revenue 2,179,824 2,110,015 2,012,744 Gross profit 2,278,212 2,043,930 1,813,577 Operating expenses: Research and development 1,008,747 942,790 1,079,081 Sales and marketing 860,821 1,022,985 1,248,032 General and administrative 449,079 468,459 517,414 Restructuring costs 13,273 165,733 76,636 Impairment of long-lived assets — 320,504 97,722 Total operating expenses 2,331,920 2,920,471 3,018,885 Loss from operations ( 53,708 ) ( 876,541 ) ( 1,205,308 ) Other expenses, net: Share of losses from equity method investment ( 108,481 ) ( 121,897 ) ( 35,315 ) Impairment of strategic investments ( 8,220 ) ( 46,154 ) — Other income (expenses), net 81,796 47,863 ( 3,009 ) Total other expenses, net ( 34,905 ) ( 120,188 ) ( 38,324 ) Loss before provision for income taxes ( 88,613 ) ( 996,729 ) ( 1,243,632 ) Provision for income taxes ( 20,790 ) ( 18,712 ) ( 12,513 ) Net loss attributable to common stockholders $ ( 109,403 ) $ ( 1,015,441 ) $ ( 1,256,145 ) Net loss per share attributable to common stockholders, basic and diluted $ ( 0.66 ) $ ( 5.54 ) $ ( 6.86 ) Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted 165,925,128 183,327,844 182,994,038 See accompanying notes to consolidated financial statements. 71 Table of Contents TWILIO INC. Consolidated Statements of Comprehensive Loss Year Ended December 31, 2024 2023 2022 (In thousands) Net loss $ ( 109,403 ) $ ( 1,015,441 ) $ ( 1,256,145 ) Other comprehensive (loss) income: Unrealized gain (loss) on marketable securities 7,332 99,742 ( 83,049 ) Foreign currency translation — 5,587 ( 5,587 ) Net change in market value of effective foreign currency forward exchange contracts ( 9,986 ) 898 556 Share of other comprehensive income (loss) from equity method investment 734 15,553 ( 14,940 ) Total other comprehensive (loss) income ( 1,920 ) 121,780 ( 103,020 ) Comprehensive loss attributable to common stockholders $ ( 111,323 ) $ ( 893,661 ) $ ( 1,359,165 ) See accompanying notes to consolidated financial statements. 72 Table of Contents TWILIO INC. Consolidated Statements of Stockholders’ Equity Common Stock Class A Additional Paid-In Capital Accumulated Other Comprehensive (Loss) Income Accumulated Deficit Total Stockholders' Equity Shares Amount (In thousands, except share amounts) Balance as of December 31, 2023 181,945,771 $ 182 $ 14,797,723 $ 619 $ ( 5,065,972 ) $ 9,732,552 Net loss — — — — ( 109,403 ) ( 109,403 ) Exercises of vested stock options 181,818 — 4,341 — — 4,341 Vesting of restricted stock units 6,639,672 7 ( 7 ) — — — Value of equity awards withheld for tax liability ( 28,006 ) — ( 2,000 ) — — ( 2,000 ) Shares of Class A common stock issued and donated to charity 88,408 — 5,907 — — 5,907 Unrealized gain on marketable securities — — — 7,332 — 7,332 Repurchases of shares of Class A common stock including related costs ( 36,848,645 ) ( 36 ) — — ( 2,346,635 ) ( 2,346,671 ) 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 income from equity method investment — — — 734 — 734 Stock-based compensation — — 634,129 — — 634,129 Stock-based compensation - restructuring — — 3,178 — — 3,178 Balance as of December 31, 2024 152,610,697 $ 153 $ 15,476,124 $ ( 1,301 ) $ ( 7,522,010 ) $ 7,952,966 See accompanying notes to consolidated financial statements. 73 Table of Contents TWILIO INC. Consolidated Statements of Stockholders’ Equity Common Stock Class A Common Stock Class B Additional Paid-In Capital Accumulated Other Comprehensive (Loss) Income Accumulated Deficit Total Stockholders' Equity Shares Amount Shares Amount (In thousands, except share amounts) Balance as of December 31, 2022 176,358,104 $ 174 9,617,605 $ 12 $ 14,055,853 $ ( 121,161 ) $ ( 3,375,836 ) $ 10,559,042 Net loss — — — — — — ( 1,015,441 ) ( 1,015,441 ) Exercises of vested stock options 238,474 — 127,982 — 7,344 — — 7,344 Vesting of restricted stock units 5,939,641 7 — — ( 7 ) — — — Value of equity awards withheld for tax liability ( 38,655 ) — — — ( 2,565 ) — — ( 2,565 ) 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 — — — 5,346 — — 5,346 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 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 income from equity method investment — — — — — 15,553 — 15,553 Stock-based compensation — — — — 682,241 — — 682,241 Stock-based compensation - restructuring — — — — 13,015 — — 13,015 Balance as of December 31, 2023 181,945,771 $ 182 — $ — $ 14,797,723 $ 619 $ ( 5,065,972 ) $ 9,732,552 See accompanying notes to consolidated financial statements. 74 Table of Contents TWILIO INC. Consolidated Statements of Stockholders’ Equity Common Stock Class A Common Stock Class B Additional Paid-In Capital Accumulated Other Comprehensive (Loss) Income Accumulated Deficit Total Stockholders' Equity Shares Amount Shares Amount (In thousands, except share amounts) Balance as of December 31, 2021 170,625,994 $ 168 9,842,105 $ 12 $ 13,169,118 $ ( 18,141 ) $ ( 2,119,691 ) $ 11,031,466 Net loss — — — — — — ( 1,256,145 ) ( 1,256,145 ) Exercises of vested stock options 373,793 — 392,231 — 22,500 — — 22,500 Vesting of restricted stock units 4,277,266 4 — — ( 4 ) — — — Value of equity awards withheld for tax liability ( 6,250 ) — — — ( 1,098 ) — — ( 1,098 ) Conversion of shares of Class B common stock into shares of Class A common stock 616,731 — ( 616,731 ) — — — — — Shares of Class A common stock issued and donated to charity 88,408 — — — 9,541 — — 9,541 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 See accompanying notes to consolidated financial statements. 75 Table of Contents TWILIO INC . Consolidated Statements of Cash Flows Year Ended December 31, 2024 2023 2022 CASH FLOWS FROM OPERATING ACTIVITIES: (In thousands) Net loss $ ( 109,403 ) $ ( 1,015,441 ) $ ( 1,256,145 ) Adjustments to reconcile net loss to net cash provided by (used in) operating activities: Depreciation and amortization 205,984 284,413 279,127 Non-cash reduction to the right-of-use asset 19,095 26,971 47,160 Net amortization of investment premium and discount ( 22,940 ) ( 44 ) 33,165 Impairment of long-lived assets — 320,504 97,722 Stock-based compensation including restructuring 616,607 675,857 798,560 Amortization of deferred commissions 76,348 72,892 57,913 Realized and unrealized losses on equity securities 1,681 8,043 — Provision for doubtful accounts 35,393 51,859 35,012 Value of shares of Class A common stock issued and donated to charity 5,907 5,346 9,541 Share of losses from equity method investment 108,481 121,897 35,315 Impairment of strategic investments 8,220 46,154 — Loss on net assets divested — 32,277 — Other adjustments 5,009 14,669 4,905 Changes in operating assets and liabilities: Accounts receivable ( 61,160 ) ( 85,093 ) ( 194,655 ) Prepaid expenses and other current assets ( 153,470 ) ( 56,283 ) ( 94,326 ) Other long-term assets ( 47,077 ) ( 2,328 ) ( 146,458 ) Accounts payable ( 20,256 ) 12,370 30,336 Accrued expenses and other current liabilities 87,434 ( 51,816 ) 75,430 Deferred revenue and customer deposits 11,181 5,371 ( 2,688 ) Operating lease liabilities ( 48,759 ) ( 56,340 ) ( 54,450 ) Other long-term liabilities ( 2,034 ) 3,474 ( 9,832 ) Net cash provided by (used in) operating activities 716,241 414,752 ( 254,368 ) CASH FLOWS FROM INVESTING ACTIVITIES: Acquisitions, net of cash acquired and payments related to prior period acquisitions — ( 5,770 ) ( 37,410 ) Divestitures, net of cash divested — 38,194 — Purchases of marketable securities and other investments ( 923,863 ) ( 1,953,003 ) ( 1,938,337 ) Proceeds from sales and maturities of marketable securities 2,353,486 2,200,417 1,439,477 Capitalized software development costs ( 51,808 ) ( 39,925 ) ( 45,761 ) Purchases of long-lived and intangible assets ( 6,978 ) ( 11,310 ) ( 34,421 ) Net cash provided by (used in) investing activities 1,370,837 228,603 ( 616,452 ) CASH FLOWS FROM FINANCING ACTIVITIES: Payments of costs related to public offerings — — ( 35 ) 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 ) Repurchases of shares of Class A common stock and related costs ( 2,334,400 ) ( 668,751 ) — Proceeds from exercises of stock options and shares of Class A common stock issued under ESPP 37,386 43,840 59,563 Net cash (used in) provided by financing activities ( 2,311,572 ) ( 643,610 ) 45,007 Effect of exchange rate changes on cash, cash equivalents and restricted cash — 108 60 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 CASH, CASH EQUIVALENTS AND RESTRICTED CASH —End of period $ 431,437 $ 655,931 $ 656,078 Cash paid for income taxes, net $ 36,547 $ 37,818 $ 7,413 Cash paid for interest $ 37,904 $ 38,389 $ 37,500 RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH TO THE CONSOLIDATED BALANCE SHEETS Cash and cash equivalents $ 421,297 $ 655,931 $ 651,752 Restricted cash in other current assets — — 4,314 Restricted cash in other long-term assets 10,140 — 12 Total cash, cash equivalents and restricted cash $ 431,437 $ 655,931 $ 656,078 See accompanying notes to consolidated financial statements. 76 Table of Contents TWILIO INC. Notes to Consolidated Financial Statements 1. Organization and Description of Business Twilio Inc. (the “Company”) was incorporated in the state of Delaware on March 13, 2008. 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. The Company’s headquarters are located in San Francisco, California, and the Company has subsidiaries across North America, South America, Europe, Asia and Australia. 2. Summary of Significant Accounting Policies (a) Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”). (b) Principles of Consolidation The consolidated financial statements include the Company and its wholly owned subsidiaries. All significant intercompany balances and transactions have been eliminated. (c) Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. These estimates are used for, but not limited to, revenue allowances and sales credit reserves; recoverability of long-lived and intangible assets; capitalization and useful life of the Company’s capitalized internal-use software development costs; fair values of acquired intangible assets and goodwill; accruals and contingencies. Estimates are based on historical experience and on various assumptions that the Company believes are reasonable under current circumstances. However, future events are subject to change and best estimates and judgments may require further adjustments, therefore, actual results could differ materially from those estimates. Management periodically evaluates such estimates and they are adjusted prospectively based upon such periodic evaluation. (d) Concentration of Credit Risk Financial instruments that potentially expose the Company to a concentration of credit risk consist primarily of cash, cash equivalents, restricted cash, marketable securities and accounts receivable. The Company maintains cash, restricted cash, cash equivalents and marketable securities with financial institutions. Certain balances held by such financial institutions exceed insured limits. 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, 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. Actual credit losses may differ from the Company’s estimates. During the years ended December 31, 2024, 2023 and 2022, no customer organization accounted for more than 10% of the Company’s total revenue. As of December 31, 2024 and 2023, no customer organization represented more than 10% of the Company’s gross accounts receivable. 77 Table of Contents (e) Revenue Recognition Revenue is recognized upon transfer of control of promised products or services to customers in an amount that reflects the consideration the Company expects to receive in exchange for those products or services. The Company enters into contracts that can include various combinations of products and services, which are generally capable of being distinct and accounted for as separate performance obligations. Revenue is recognized net of allowances for credits and any taxes collected from customers, which are subsequently remitted to governmental authorities. The Company determines revenue recognition through the following steps: • Identification of the contract, or contracts, with a customer; • Identification of the performance obligations in the contract; • Determination of the transaction price; • Allocation of the transaction price to the performance obligations in the contract; and, • Recognition of revenue when, or as, the Company satisfies a performance obligation. Nature of Products and Services The Company recognizes revenue from its products on either a usage basis or a subscription basis, depending on the nature of the product and the type of customer contract. The Company’s reportable segments may contain products that follow either revenue recognition model. The majority of the revenue in the Communications segment is derived from usage‑based fees. These fees are earned when customers access the Company’s cloud-based platform and start using the Company’s products. Platform access is considered a monthly series comprised of one performance obligation and usage-based fees are recognized as revenue in the period in which the usage occurs. Some examples of the usage-based products are Messaging and Voice. For the Messaging products, the fees relate to the number of text messages sent or received. For the Voice products, the fees primarily relate to minutes of call duration. In the years ended December 31, 2024, 2023 and 2022, the revenue from usage-based fees represented 72 %, 71 %, and 73 % of total revenue, respectively. Subscription-based fees are derived from various products in both the Communications and Segment segments. 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 . In the years ended December 31, 2024, 2023 and 2022, the revenue from non-usage-based fees represented 28 %, 29 %, and 27 % of total revenue, respectively. When usage-based products are embedded into subscription-based products, the Company charges for each product separately and records the respective revenue into the reportable segment in which each product resides. No significant judgments are required in determining whether products and services are considered distinct performance obligations and should be accounted for separately versus together, or to determine the stand-alone selling price. The Company's arrangements do not contain general rights of return. However, credits may be issued on a case-by-case basis. The contracts do not provide customers with the right to take possession of the software supporting the applications. Amounts that have been invoiced are recorded in accounts receivable and in revenue or deferred revenue depending on whether the revenue recognition criteria have been met. The Company defines U.S. revenue as revenue from customers with IP addresses or mailing addresses at the time of registration in the United States. The Company defines international revenue as revenue from customers with IP addresses or mailing addresses at the time of registration outside of the United States. 78 Table of Contents Remaining Performance Obligations 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. Revenue allocated to remaining performance obligations for contracts with durations of greater than one year was $ 182.3 million as of December 31, 2024, of which 59 % is expected to be recognized over the next 12 months and 91 % is expected to be recognized over the next 24 months. (f) Deferred Revenue and Customer Deposits Deferred revenue is recorded when a non-cancellable contractual right to bill exists or when cash payments are received in advance of future usage on non-cancelable contracts. Customer refundable prepayments are recorded as customer deposits. As of December 31, 2024 and 2023, the Company recorded $ 155.7 million and $ 144.5 million as its deferred revenue and customer deposits, respectively, that are included in deferred revenue and customer deposits in the accompanying consolidated balance sheets. During the years ended December 31, 2024, 2023 and 2022, the Company recognized $ 120.7 million, $ 120.5 million, and $ 124.9 million of revenue, respectively, that was included in the deferred revenue and customer deposits balance as of the end of the previous year. (g) Deferred Sales Commissions The Company records an asset for the incremental costs of obtaining a contract with a customer, for example, sales commissions that are earned upon execution of contracts. 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 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. Total net capitalized commission costs as of December 31, 2024 and 2023, were $ 166.0 million and $ 200.1 million, respectively, and are included in prepaid expenses and other current assets and other long‑term assets in the accompanying consolidated balance sheets. Amortization of these assets was $ 76.3 million, $ 72.9 million and $ 57.9 million in the years ended December 31, 2024, 2023 and 2022, respectively, and is included in sales and marketing expense in the accompanying consolidated statements of operations. (h) Cost of Revenue 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 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. Certain costs of revenue are allocated to segments based on methodologies that best reflect the patterns of consumptions of these costs. (i) Research and Development Expense Research and development expenses consist primarily of personnel costs, outsourced engineering services, cloud infrastructure fees for staging and development of the Company’s products, depreciation, amortization of capitalized internal-use software development costs and an allocation of general overhead expenses. The Company capitalizes the portion of its software development costs that meets the criteria for capitalization. Research and development expenses are generally directly attributable to each segment. Certain research and development expenses are allocated to segments based on methodologies that best reflect the patterns of consumptions of these costs. Certain research and development costs are not allocated to segments because they support company-wide processes and are managed on a company-wide level. 79 Table of Contents (j) Internal-Use Software Development Costs Certain costs of platform and other software applications developed for internal use are capitalized. The Company capitalizes qualifying internal-use software development costs that are incurred during the application development stage. Capitalization of costs begins when two criteria are met: (i) the preliminary project stage is completed and (ii) it is probable that the software will be completed and used for its intended function. Capitalization ceases when the software is substantially complete and ready for its intended use, including the completion of all significant testing. The Company also capitalizes costs related to specific upgrades and enhancements when it is probable the expenditures will result in additional functionality. Costs incurred for maintenance, minor upgrades and enhancements are expensed. Costs related to preliminary project activities and post-implementation operating activities are also expensed as incurred. Capitalized costs of platform and other software applications are included in property and equipment. These costs are amortized over the estimated useful life of the software on a straight-line basis over three years . Management evaluates the useful life of these assets on an annual basis and tests for impairment whenever events or changes in circumstances occur that could impact the recoverability of these assets. The amortization of costs related to the platform applications is included in cost of revenue, while the amortization of costs related to software applications developed for internal use is included in operating expenses. (k) Advertising Costs Advertising costs are expensed as incurred and were $ 48.7 million, $ 71.1 million and $ 92.6 million in the years ended December 31, 2024, 2023 and 2022, respectively. Advertising costs are included in sales and marketing expenses in the accompanying consolidated statements of operations. (l) Restructuring Costs The Company records restructuring expenses when management commits to a restructuring plan, the restructuring plan identifies all significant actions, the period of time to complete the restructuring plan indicates that significant changes to the plan are not likely and employees who are impacted have been notified of the pending involuntary termination. (m) Stock-Based Compensation All stock-based compensation to employees is measured on the grant date based on the fair value of the awards on the date of grant. 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 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. The Black-Scholes option pricing model requires the use of complex assumptions, which determine the fair value of stock options and the purchase rights issued under the ESPP. If any of the assumptions used in the Black-Scholes model change, stock-based compensation for future options may differ materially compared to that associated with previous grants. These assumptions include: • Fair value of the common stock. The Company uses the market closing price of its Class A common stock, as reported on the New York Stock Exchange, for the fair value. • Expected term. The expected term represents the period that the stock option or the purchase right is expected to be outstanding. The Company uses the simplified calculation of expected term, which reflects the weighted-average time-to-vest and the contractual life of the stock option or the purchase right; 80 Table of Contents • Expected volatility. 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. The risk-free interest rate is based on the U.S. Treasury yield curve in effect at the time of grant for zero coupon U.S. Treasury notes with maturities approximately equal to the expected term of the stock-based awards; and • Expected dividend. The expected dividend is assumed to be zero as the Company has never paid dividends and has no current plans to pay any dividends on its common stock. (n) Income Taxes The Company accounts for income taxes using 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 losses and tax credit carry-forwards. 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. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance reduces the deferred tax assets to the amount that is more likely than not to be realized. The Company recognizes the effect of uncertain income tax positions only if those positions are more likely than not of being sustained. Recognized income tax positions are measured at the largest amount that is more than 50% likely of being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment occurs. 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 The functional currency of the Company's foreign subsidiaries is primarily the U.S. dollar. Accordingly, the subsidiaries remeasure monetary assets and liabilities at period-end exchange rates, while non-monetary items are remeasured at historical rates. Revenue and expense accounts are remeasured at the average exchange rate in effect during the month in which the transactions occur. Remeasurement adjustments are recognized in the consolidated statements of operations as other income (expense), net, in the year of occurrence. Foreign currency transaction gains and losses are included in other income (expenses), net, in the accompanying consolidated statements of operations. 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 (loss) income as part of the total stockholders' equity. Monetary assets and liabilities denominated in a foreign currency are translated into U.S. dollars at the exchange rate on the balance sheet date. Revenue and expenses are translated at the weighted average exchange rates in effect during the month in which the transactions occur. Equity transactions are translated using historical exchange rates. (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. (q) Net Loss Per Share Attributable to Common Stockholders 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 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. 81 Table of Contents 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 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. These securities are presented in Note 20 to these consolidated financial statements. (r) Cash and Cash Equivalents 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, 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. (s) Accounts Receivable and Allowance for Doubtful Accounts Accounts receivable are recorded net of the allowance for doubtful accounts. The allowance for doubtful accounts is estimated based on the Company's assessment of its ability to collect on customer accounts receivable. The Company regularly reviews the allowance by considering certain factors such as historical experience, credit quality, age of accounts receivable balances and other known conditions that may affect a customer's ability to pay. In cases where the Company is aware of circumstances that may impair a specific customer's ability to meet their financial obligations, a specific allowance is recorded against amounts due from the customer which reduces the net recognized receivable to the amount the Company reasonably believes will be collected. The Company writes-off accounts receivable against the allowance when a determination is made that the balance is uncollectible and collection of the receivable is no longer being actively pursued. 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) Property and Equipment Property and equipment, both owned and under finance leases, is stated at cost less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful life of the related asset. Maintenance and repairs are expensed as incurred. The useful lives of property and equipment are as follows: Capitalized internal-use software development costs 3 years Data center equipment 2 - 4 years Leasehold improvements Shorter of 5 years or the remaining lease term Office equipment 3 years Furniture and fixtures 5 years Software 3 years Assets under financing lease Shorter of 5 years or the remaining lease term (u) Leases The Company determines if an arrangement is or contains a lease at contract inception. The Company presents the operating leases in long-term assets and current and long-term liabilities. Finance lease assets are included in property and equipment, net, and finance lease liabilities are presented in current and long-term liabilities in the accompanying consolidated balance sheets. 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 82 Table of Contents 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. The Company’s lease agreements may have lease and non-lease components, which the Company accounts for as a single lease component. When estimating the lease term, the Company includes options to extend or terminate the lease when it is reasonably certain such options will be exercised. Operating lease costs are recognized in operating expenses in the accompanying consolidated statements of operations on a straight-line basis over the lease term and variable payments are recognized in the period they are incurred. The Company’s lease agreements do not contain any residual value guarantees. Leases with an initial term of 12 months or less are not recorded on the balance sheet. 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. (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. Equity method investments are originally recorded at cost and are increased or reduced in subsequent periods to reflect the Company’s proportionate share of the investee’s net earnings or losses and other comprehensive income or losses, as those occur. The Company records the investee losses on a three-month lag and up to the carrying amount of the investment. Investments are also increased or decreased by contributions made to and distributions received from the investee, basis difference amortization and other-than-temporary impairments, if any. All costs directly associated with the acquisition of the investment are included in the carrying amount of the investment. Profits or losses related to intra-entity sales are eliminated until realized by the Company or the investee. The Company determines the difference between its purchase price and its proportionate share of the net assets of the investee, which results in an excess basis in the investment. This excess basis is allocated to the identifiable assets and liabilities of the investee utilizing purchase accounting principles and is used to calculate the amortization of basis differences every reporting period. Basis differences related to intangible assets with determinable economic lives and liabilities are generally amortized on a straight-line basis over the useful lives of the associated assets and the expected term for the liabilities. Basis differences related to intangible assets without determinable economic lives are not amortized. Equity method goodwill is not amortized or tested for impairment. Instead, the Company evaluates its equity method investments for impairment whenever events or changes in circumstance indicate that the carrying amounts of such investments may be in excess of their fair value. When such indicators exist, the other-than-temporary impairment model is utilized, which considers the severity and duration of a decline in fair value below book value and the Company’s ability and intent to hold the investment for a sufficient period of time to allow for recovery. 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. (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. 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. Goodwill is measured as the excess of the consideration transferred over the fair value of the net assets acquired on the acquisition date. While the Company uses its best estimates and assumptions as part of the purchase price allocation process to accurately value assets acquired and liabilities assumed, these estimates are inherently uncertain and subject to refinement. The authoritative guidance allows a measurement period of up to one year from the date of acquisition to make adjustments to the preliminary allocation of the purchase price. As a result, during the measurement period the Company may record adjustments to the fair values of assets acquired and liabilities assumed, with the corresponding offset to goodwill to the extent that it identifies adjustments to the preliminary purchase price allocation. Upon conclusion of the measurement period or final determination of the values of the assets acquired and liabilities assumed, whichever comes first, any subsequent adjustments are recorded in the consolidated statements of operations. 83 Table of Contents (y) Goodwill Goodwill represents the excess of the aggregate purchase price over the fair value of net identifiable assets acquired in a business combination. Goodwill is not amortized and is tested for impairment at least annually or whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Goodwill is allocated within the operating segments of the Company to the reporting units. Prior to 2023, the Company had one reporting unit. 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. Intangible assets with determinable economic lives are carried at cost, less accumulated amortization. Amortization is computed over the estimated useful life of each asset on a straight-line basis. The Company determines the useful lives of identifiable intangible assets after considering the specific facts and circumstances related to each intangible asset. Factors the Company considers when determining useful lives include the contractual term of any agreement related to the asset, the historical performance of the asset, the Company's long-term strategy for using the asset, any laws or other local regulations which could impact the useful life of the asset and other economic factors, including competition and specific market conditions. Intangible assets without determinable economic lives are carried at cost, not amortized and reviewed for impairment at least annually. The useful lives of the intangible assets are as follows: Developed technology 4 - 7 years Customer relationships 6 - 10 years Supplier relationships 5 years Trade names 5 years Patents 20 years Telecommunication licenses Indefinite Trademarks Indefinite Domain names Indefinite 84 Table of Contents (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, 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. 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. (ab) Derivatives and Hedging The Company is exposed to a wide variety of risks arising from its business operations and overall economic conditions. These risks include exposure to fluctuations in various foreign currencies against its functional currency and can impact the value of cash receipts and payments. The Company minimizes its exposure to these risks through management of its core business activities, specifically, the amounts, sources and duration of its assets and liabilities, and the use of derivative financial instruments. The Company uses foreign currency derivative forward contracts, and in the future may also use foreign currency option contacts. Foreign currency derivative forward contracts involve fixing the exchange rate for delivery of a specified amount of foreign currency on a specified date. These agreements are typically cash settled in U.S. dollars for their fair value at or close to their settlement date. Foreign currency option contracts will require the Company to pay a premium for the right to sell a specified amount of foreign currency prior to the maturity date of the option. The Company does not enter into derivative financial instruments trading for speculative purposes. Derivative instruments are carried at fair value and recorded as either an asset or a liability until they mature. Gains and losses resulting from changes in fair value of these instruments are accounted for depending on the use of the derivative and whether it is designated and qualifies for hedge accounting. For derivative instruments designated as cash flow hedges, gains or losses are initially recorded in accumulated other comprehensive income (loss) on the balance sheet, then reclassified into the statement of operations in the period in which the derivative instruments mature. These realized gains and losses are recorded within the same financial statement line item as the hedged transaction. 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. (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. (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. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting guidance establishes a three-tiered hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value as follows: • Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities accessible to the reporting entity at the measurement date. 85 Table of Contents • Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the asset or liability. • Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent that observable inputs are not available, thereby allowing for situations in which there is little, if any, market activity for the asset or liability at measurement date. 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 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. All marketable securities are considered to be available-for-sale and recorded at their estimated fair values. Unrealized gains and losses for available-for-sale securities are recorded in other comprehensive loss. 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. These financial liabilities are not measured at fair value on a recurring basis. 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 or impairment. 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. As of December 31, 2024, the risk of expected credit losses was not significant. 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 (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 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. ASU 2023-07 is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with retrospective application required. Early adoption is permitted. The Company 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. 86 Table of Contents (af) Recently Issued Accounting Guidance, Not yet Adopted In December 2023, the FASB issued ASU 2023-09, “ Income Taxes (Topic 740): Improvements to Income Tax Disclosures, ” which requires disclosure of disaggregated income taxes paid, prescribes standard categories for the components of the effective tax rate reconciliation and modifies other income tax related disclosures. ASU 2023-09 is effective for annual periods beginning after December 15, 2024, and may be applied on a prospective basis. Early adoption is permitted. The Company expects to adopt ASU 2023-09 upon its effective date. The adoption will require certain additional disclosure in the notes to the Company’s consolidated financial statements. 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. 3. Fair Value Measurements Financial Assets The following tables provide the financial assets measured at fair value on a recurring basis: Amortized Cost or Carrying Value Gross Unrealized Gains Gross Unrealized Losses Less Than 12 Months Gross Unrealized Losses More Than 12 Months Fair Value Hierarchy as of December 31, 2024 Aggregate Fair Value Level 1 Level 2 Level 3 Financial Assets: (In thousands) Cash and cash equivalents: Money market funds $ 207,323 $ — $ — $ — $ 207,323 $ — $ — $ 207,323 Commercial paper 15,059 — — — — 15,059 — 15,059 U.S. Treasury bills 2,748 — — — 2,748 — — 2,748 Total included in cash and cash equivalents 225,130 — — — 210,071 15,059 — 225,130 Marketable securities: Debt securities: U.S. Treasury securities 379,846 1,243 ( 296 ) ( 55 ) 380,738 — — 380,738 Non-U.S. government securities 2,909 27 — — 2,936 — — 2,936 Corporate debt securities and commercial paper 1,571,944 6,415 ( 1,594 ) ( 557 ) 16,890 1,559,318 — 1,576,208 Total debt securities 1,954,699 7,685 ( 1,890 ) ( 612 ) 400,564 1,559,318 — 1,959,882 Equity securities 3,220 — — — 3,220 — — 3,220 Total marketable securities 1,957,919 7,685 ( 1,890 ) ( 612 ) 403,784 1,559,318 — 1,963,102 Total financial assets $ 2,183,049 $ 7,685 $ ( 1,890 ) $ ( 612 ) $ 613,855 $ 1,574,377 $ — $ 2,188,232 87 Table of Contents Amortized Cost or Carrying Value Gross Unrealized Gains Gross Unrealized Losses Less Than 12 Months Gross Unrealized Losses More Than 12 Months Fair Value Hierarchy as of December 31, 2023 Aggregate Fair Value Level 1 Level 2 Level 3 Financial Assets: (In thousands) Cash and cash equivalents: Money market funds $ 408,696 $ — $ — $ — $ 408,696 $ — $ — $ 408,696 Total included in cash and cash equivalents 408,696 — — — 408,696 — — 408,696 Marketable securities: Debt securities: U.S. Treasury securities 410,665 2,162 ( 7 ) ( 1,665 ) 411,155 — — 411,155 Non-U.S. 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 securities 3,358,213 17,583 ( 10,936 ) ( 8,796 ) 515,057 2,841,007 — 3,356,064 Total financial assets $ 3,766,909 $ 17,583 $ ( 10,936 ) $ ( 8,796 ) $ 923,753 $ 2,841,007 $ — $ 3,764,760 Debt Securities 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. Because the Company views its debt securities as available to support current operations, it has classified all available for sale securities as short-term. Interest earned on marketable securities was $ 90.2 million, $ 77.7 million and $ 64.6 million in the years ended December 31, 2024, 2023 and 2022, respectively. The interest is recorded as other income (expenses), net, in the accompanying consolidated statements of operations. The following table summarizes the contractual maturities of marketable securities: As of December 31, 2024 2023 Amortized Cost Aggregate Fair Value Amortized Cost Aggregate Fair Value Financial Assets: (In thousands) Less than one year $ 684,294 $ 685,091 $ 1,448,256 $ 1,434,149 One to three years 1,270,405 1,274,791 1,905,056 1,917,014 Total $ 1,954,699 $ 1,959,882 $ 3,353,312 $ 3,351,163 Equity Securities The equity securities consist of shares of a publicly traded company that were received as consideration in a divestiture transaction described 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. 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. The fair value measurement of the strategic investment is classified as Level 2 in the fair value hierarchy and the primary input used in the fair value measurement was the publicly available stock price of the issuer’s unrestricted security of the same class. The impairment loss of $ 46.2 million is recorded in other expenses, net, in the accompanying consolidated statement of operations for the year ended December 31, 2023. 88 Table of Contents Financial Liabilities The Company’s financial liabilities that are measured at fair value on a recurring basis consist of foreign currency derivative liabilities and are classified as Level 2 financial instruments in the fair value hierarchy. As of December 31, 2024 and 2023, the aggregate fair value of these liabilities and the associated unrealized losses were not significant. The Company’s financial liabilities that are not measured at fair value on a recurring basis are its 2029 Notes and its 2031 Notes. As of December 31, 2024, the fair value of the 2029 Notes and 2031 Notes were $ 464.9 million and $ 453.9 million, respectively. 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. 4. Property and Equipment Property and equipment consist of the following: As of December 31, 2024 2023 (In thousands) Capitalized internal-use software developments costs $ 357,334 $ 297,655 Data center equipment (1) 63,672 104,543 Leasehold improvements 78,104 92,315 Office equipment 50,659 60,905 Furniture and fixtures 12,618 14,558 Software 14,143 14,639 Total property and equipment 576,530 584,615 Less: accumulated depreciation and amortization (1) ( 385,488 ) ( 374,976 ) Total property and equipment, net $ 191,042 $ 209,639 ____________________________________ ( 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. Depreciation and amortization expense was $ 91.9 million, $ 89.9 million and $ 71.7 million for the years ended December 31, 2024, 2023 and 2022, respectively. 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. 5. Divestitures 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. The sale resulted in a loss of $ 28.8 million, which is recorded within general and administrative expenses in the accompanying consolidated statement of operations for the year ended December 31, 2023. The Company also recorded an additional $ 3.3 million of divestiture-related expenses in the same period. 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. 89 Table of Contents 6. Impairment Operating right-of-use assets 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 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. The impairment is recorded in the impairment of long-lived assets line item in the accompanying consolidated statements of operations for the years ended December 31, 2023 and 2022. Intangible assets In the fourth quarter of 2023, the Company identified a change in its Segment reportable segment’s performance which it deemed to be an indicator that the carrying amounts of certain long-lived assets within the segment may not be recoverable. The Company performed a recoverability assessment and a fair value measurement of the impacted asset group and concluded that the asset group was impaired. The Company engaged a third-party expert to assist with the valuation analysis. The impairment was allocated to the assets within the impacted asset group reducing the respective carrying amounts of the assets as of the December 1, 2023, measurement date, as follows: Total Impairment Allocation (In thousands) Developed technology $ 209,350 Customer relationships 76,361 Total impairment $ 285,711 The impairment is recorded within the impairment of long-lived assets line item in the accompanying consolidated statement of operations for the year ended December 31, 2023. The Company used a relief-from-royalty method to estimate the fair values of the developed technology and the trade name and a distributor method to estimate the fair value of customer relationships. The trade name intangible asset was not impaired. No other significant impairments were recorded during the years ended December 31, 2024, 2023 or 2022. 7. 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. The February 2023 Plan eliminated approximately 17 % of the Company’s workforce. The execution of the February 2023 Plan was substantially completed in the first quarter of 2023. 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. $ 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. 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 sheet as of December 31, 2023: 90 Table of Contents Workforce Reduction Costs Facilitation Costs Total (In thousands) Balance as of December 31, 2022 $ — $ — $ — Restructuring charges 120,711 9,289 130,000 Cash payments ( 111,852 ) ( 8,895 ) ( 120,747 ) Balance as of December 31, 2023 $ 8,859 $ 394 $ 9,253 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”). The December 2023 Plan eliminated approximately 5 % of the Company’s workforce. Restructuring charges related to the December 2023 Plan were not significant. In September 2022, the Company announced a workforce restructuring plan that was designed to reduce operating costs and improve operating margins (the “September 2022 Plan”). The September 2022 Plan eliminated approximately 11 % of the Company’s workforce. 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. 8. Segment Reporting As of December 31, 2024, the Company had two operating and reportable segments: Twilio Communications (“Communications”) and Twilio Segment (“Segment”). Twilio Communications : The Communications segment consists of a variety of application programming interfaces (“APIs”) and software solutions to optimize communications between Twilio customers and their end users. The key products from which the segment derives its revenue are Messaging, Voice and Email. Twilio Segment : 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 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 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 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. 91 Table of Contents Year Ended December 31, 2024 Communications Segment Total (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 $ 979,394 Corporate costs not allocated to segments ( 265,000 ) Stock-based compensation ( 613,429 ) Amortization of acquired intangibles ( 111,851 ) Payroll taxes related to stock-based compensation ( 9,642 ) Charitable contributions ( 19,907 ) Restructuring costs ( 13,273 ) Loss from operations ( 53,708 ) Other expenses, net ( 34,905 ) Loss before provision for income taxes $ ( 88,613 ) Year Ended December 31, 2023 Communications Segment Total (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 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 $ 769,560 Corporate costs not allocated to segments ( 236,552 ) Stock-based compensation ( 662,842 ) Amortization of acquired intangibles ( 192,307 ) Acquisition and divestiture related expenses ( 5,555 ) Loss on net assets divested ( 32,277 ) Payroll taxes related to stock-based compensation ( 12,985 ) Charitable contributions ( 17,346 ) Restructuring costs ( 165,733 ) Impairment of long-lived assets ( 320,504 ) Loss from operations ( 876,541 ) Other expenses, net ( 120,188 ) Loss before provision for income taxes $ ( 996,729 ) 92 Table of Contents Year Ended December 31, 2022 Communications Segment Total (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 $ 288,985 Corporate costs not allocated to segments ( 293,475 ) Stock-based compensation ( 784,285 ) Amortization of acquired intangibles ( 206,181 ) Acquisition and divestiture related expenses ( 2,621 ) Payroll taxes related to stock-based compensation ( 23,832 ) Charitable contributions ( 9,541 ) Restructuring costs ( 76,636 ) Impairment of long-lived assets ( 97,722 ) Loss from operations ( 1,205,308 ) Other expenses, net ( 38,324 ) Loss before provision for income taxes $ ( 1,243,632 ) 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, 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. 9. Derivatives and Hedging As of December 31, 2024, the Company had outstanding foreign currency forward contracts designated as cash flow hedges with a total sell notional value of $ 216.4 million. The notional value represents the amount that will be sold upon maturity of the forward contract. 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 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. It is the Company’s policy to present the derivatives at gross in its consolidated balance sheets. The Company’s foreign currency forward contracts are not subject to any credit contingent features or collateral requirements. The Company manages its exposure to counterparty risk by entering into contracts with a diversified group of major financial institutions and by actively monitoring its outstanding positions. As of December 31, 2024, the Company did not have any offsetting arrangements. 10. Right-of-Use Assets and Lease Liabilities 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. 93 Table of Contents 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. 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 ROU assets. The remaining impairment expense related to the associated assets in the property, plant and equipment categories. 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. Lease costs associated with short-term leases, variable leases and finance leases were not significant. Supplemental cash flow and other information related to operating leases are as follows: Year Ended December 31, 2024 2023 Operating cash flows paid for amounts included in operating lease liabilities (in thousands) $ 54,376 $ 65,494 Weighted average remaining lease term (in years) 3.6 4.1 Weighted average discount rate 4.6 % 4.5 % Maturities of operating lease liabilities are as follows: As of December 31, 2024 Year Ended December 31, (In thousands) 2025 $ 38,474 2026 35,035 2027 27,565 2028 22,588 2029 5,897 Total lease payments 129,559 Less: imputed interest ( 9,999 ) Total operating lease obligations 119,560 Less: current obligations ( 33,685 ) Long-term operating lease obligations $ 85,875 11. Equity Method Investment 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. The Company estimated that on the investment closing date there was an excess investment basis of $ 530.7 million related to its proportionate share of the identifiable intangible assets and $ 41.3 million related to the associated deferred tax liability. The equity method goodwill was estimated at $ 623.8 million. The Company engaged a third‑party expert to assist with the valuation analysis. The following table presents the estimated basis differences attributable to the identifiable intangible assets as of the date of investment and their respective useful lives: Total Estimated life (In thousands) (In years) Developed technology $ 62,767 6 Customer relationships 439,152 9 Trademarks 28,822 Indefinite Total basis difference attributable to the identifiable intangible assets $ 530,741 94 Table of Contents 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, 2024 2023 (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 ) Net loss $ ( 38,849 ) $ ( 89,096 ) $ ( 312,773 ) Net loss attributable to Syniverse Corporation $ ( 40,917 ) $ ( 90,770 ) $ ( 314,379 ) ____________________________________ (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. 12. Goodwill and Intangible Assets Goodwill 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 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 95 Table of Contents 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 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: Twilio Communications Twilio Segment Total (In thousands) Balance as of December 31, 2022 $ — $ — $ 5,284,153 Foreign currency adjustments 26 Reallocation to segments in 2023 (1) $ 4,978,094 $ 306,085 — Foreign currency adjustments 251 — 251 Goodwill divested (2) ( 41,164 ) — ( 41,164 ) Balance as of December 31, 2023 $ 4,937,181 $ 306,085 $ 5,243,266 ____________________________________ ( 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 Intangible assets consist of the following: As of December 31, 2024 Cost Accumulated Amortization Net Amortizable intangible assets: (In thousands) Developed technology $ 388,341 $ ( 306,063 ) $ 82,278 Customer relationships 348,314 ( 215,523 ) 132,791 Supplier relationships 49,756 ( 35,363 ) 14,393 Trade names 25,968 ( 25,014 ) 954 Patent 3,968 ( 1,096 ) 2,872 Total amortizable intangible assets 816,347 ( 583,059 ) 233,288 Non-amortizable intangible assets: Telecommunication licenses 4,920 — 4,920 Trademarks and other 295 — 295 Total $ 821,562 $ ( 583,059 ) $ 238,503 96 Table of Contents As of December 31, 2023 Cost Accumulated Amortization Net Amortizable intangible assets: (In thousands) Developed technology $ 397,473 $ ( 259,635 ) $ 137,838 Customer relationships 349,074 ( 170,511 ) 178,563 Supplier relationships 49,756 ( 26,316 ) 23,440 Trade names 25,968 ( 23,600 ) 2,368 Order backlog 10,000 ( 10,000 ) — Patent 3,968 ( 902 ) 3,066 Total amortizable intangible assets 836,239 ( 490,964 ) 345,275 Non-amortizable intangible assets: Telecommunication licenses 4,920 — 4,920 Trademarks and other 295 — 295 Total $ 841,454 $ ( 490,964 ) $ 350,490 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. Total estimated future amortization expense is as follows: As of December 31, 2024 Year Ended December 31, (In thousands) 2025 $ 107,862 2026 42,149 2027 25,330 2028 19,055 2029 14,970 Thereafter 23,922 Total $ 233,288 97 Table of Contents 13. Balance Sheet Components Prepaid expenses and other current assets consist of the following: As of December 31, 2024 2023 (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: As of December 31, 2024 2023 (In thousands) Accrued payroll and related $ 76,708 $ 77,593 Company-wide bonus program liability 109,776 — Accrued bonus and commission 21,585 17,345 Accrued cost of revenue 173,739 155,721 Sales and other taxes payable 79,731 70,913 Restructuring liability 318 29,086 Accrued other expense 68,829 73,653 Total accrued expenses and other current liabilities $ 530,686 $ 424,311 14. Long-Term Debt Long-term debt, net, consists of the following: As of December 31, 2024 2023 (In thousands) 2029 Senior Notes Principal $ 500,000 $ 500,000 Unamortized discount ( 3,518 ) ( 4,274 ) Unamortized issuance costs ( 792 ) ( 962 ) Net carrying amount 495,690 494,764 2031 Senior Notes Principal 500,000 500,000 Unamortized discount ( 4,166 ) ( 4,744 ) Unamortized issuance costs ( 937 ) ( 1,067 ) Net carrying amount 494,897 494,189 Total long-term debt, net $ 990,587 $ 988,953 98 Table of Contents 2029 and 2031 Senior Notes In March 2021, the Company issued $ 1.0 billion aggregate principal amount of senior notes, consisting of $ 500.0 million principal amount of 3.625 % notes due 2029 (the “2029 Notes”) and $ 500.0 million principal amount of 3.875 % notes due 2031 (the “2031 Notes” and together with the 2029 Notes, the “Notes”). Initially, none of the Company’s subsidiaries guaranteed the Notes. However, under certain circumstances in the future the Notes can be guaranteed by each of the Company’s material domestic subsidiaries. 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. 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. 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; (2) at any time on or after March 15, 2025 at a prepayment price equal to 100.906 % of the principal amount; and (3) at any time on or after March 15, 2026 at a prepayment price equal to 100.000 % of the principal amount; in each case, the redemption will include the accrued and unpaid interest, as applicable. 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; (2) at any time on or after March 15, 2026 at a prepayment price equal to 101.938 % of the principal amount; (3) at any time on or after March 15, 2027 at a prepayment price equal to 101.292 % of the principal amount; (4) at any time on or after March 15, 2028 at a prepayment price equal to 100.646 % of the principal amount; and (5) at any time on or after March 15, 2029 at a prepayment price equal to 100.000 % of the principal amount; in each case, the redemption will include accrued and unpaid interest, as applicable. The Notes are general unsecured obligations and will rank senior in right of payment to any of the Company’s indebtedness that is expressly subordinated in right of payment to the Notes that the Company may incur in the future and equal in right of payment with the Company’s existing and future unsecured and unsubordinated liabilities. In certain circumstances involving a change of control event, the Company will be required to make an offer to repurchase the Notes of the applicable series at a repurchase price equal to 101 % of the principal amount of the Notes of such series to be repurchased, plus accrued and unpaid interest, if any, to the applicable repurchase date. The indenture governing the Notes (the “Indenture”) contains restrictive covenants limiting the Company’s ability and the ability of its subsidiaries to: (i) create liens on certain assets to secure debt; (ii) grant a subsidiary guarantee of certain debt without also providing a guarantee of the Notes; and (iii) consolidate or merge with or into, or sell or otherwise dispose of all or substantially all of its assets to another person. These covenants are subject to a number of limitations and exceptions. Certain of these covenants will not apply during any period in which the Notes are rated investment grade by either Moody’s Investors Service, Inc. or Standard & Poor’s Ratings Services. As of December 31, 2024, the Company was in compliance with all of its covenants under the Indenture. 99 Table of Contents 15. Supplemental Balance Sheet Information A roll‑forward of the Company’s customer credit reserve is as follows: As of December 31, 2024 2023 2022 (In thousands) Balance, beginning of period $ 33,594 $ 33,124 $ 18,577 Additions 81,695 167,044 86,303 Deductions against reserve ( 95,948 ) ( 166,574 ) ( 71,756 ) Balance, end of period $ 19,341 $ 33,594 $ 33,124 16. Revenue by Geographic Area and Groups of Similar Products 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: Year Ended December 31, 2024 2023 2022 Revenue by geographic area: (In thousands) United States $ 2,898,056 $ 2,757,470 $ 2,510,525 International 1,559,980 1,396,475 1,315,796 Total $ 4,458,036 $ 4,153,945 $ 3,826,321 Percentage of revenue by geographic area: United States 65 % 66 % 66 % International 35 % 34 % 34 % The following table sets forth long-lived assets by geographic area: As of December 31, 2024 2023 Long-lived assets by geographic area: (In thousands) United States $ 65,782 $ 99,368 International 25,676 39,644 Total $ 91,458 $ 139,012 Percentage of long-lived assets by geographic area: United States 72 % 71 % International 28 % 29 % 100 Table of Contents The following table sets forth revenue by groups of similar products: Year Ended December 31, 2024 2023 2022 Revenue by groups of similar products: (In thousands) Twilio Communications: Messaging $ 2,358,767 $ 2,184,752 $ 2,066,300 Voice 543,117 511,728 474,790 Email 488,271 440,185 399,314 Other 770,185 722,028 609,683 Total Twilio Communications 4,160,340 3,858,693 3,550,087 Twilio Segment 297,696 295,252 276,234 Total $ 4,458,036 $ 4,153,945 $ 3,826,321 17. Commitments and Contingencies (a) Lease and Other Commitments The Company entered into various non-cancelable operating lease agreements for its facilities. 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 four years . 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. Unrecognized tax benefits are not included in these amounts because any amounts expected to be settled in cash are not significant: As of December 31, 2024 Year Ending December 31, (In thousands) 2025 $ 405,331 2026 245,946 2027 3,831 2028 220 Total payments $ 655,328 (b) Legal Matters From time to time, the Company may be subject to legal actions, claims, and government investigations or inquiries arising in the ordinary course of business. These matters may include, but are not limited to, matters involving privacy, data protection, data security, intellectual property, competition, telecommunications, consumer protection, taxation, securities, employment and contractual rights. While the Company currently believes that the final outcomes of these matters will not have a material adverse effect on its business, the results of any current or future litigation cannot be predicted with certainty, and regardless of the outcome, litigation can have an adverse impact on the Company because of defense and settlement costs, diversion of management resources and other factors. The Company accrues for contingencies when 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. 101 Table of Contents (c) Indemnification Agreements In the ordinary course of business and in connection with its financing and business combination transactions, the Company enters into contractual arrangements under which it agrees to provide indemnification of varying scope and terms to business partners, customers and other parties with respect to certain matters, including, but not limited to, losses arising out of the breach of such agreements, intellectual property infringement claims made by third parties and other liabilities relating to or arising from the Company’s products or its acts or omissions. The Company has also signed indemnification agreements with all of its board members and executive officers and certain employees that may require the Company to indemnify them for certain events in connection with their services to the Company or its direct or indirect subsidiaries. As of December 31, 2024 and 2023, no amounts were accrued related to any outstanding indemnification agreements. (d) Other Taxes The Company conducts operations in many tax jurisdictions within and outside the United States. In many of these jurisdictions, non-income-based taxes, such as sales, use, telecommunications and other local taxes are assessed on the Company’s operations. The Company carries reserves for certain of its non-income-based tax exposures in certain jurisdictions when it is both probable that a liability was incurred and the amount of the exposure 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 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, 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. 18. Stockholders' Equity Preferred Stock 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. Common Stock 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: As of December 31, 2024 2023 Stock options issued and outstanding 1,322,176 1,722,861 Unvested restricted stock units issued and outstanding 18,386,271 18,755,538 Shares of Class A common stock reserved for Twilio.org 353,633 442,041 Stock-based awards available for grant under 2016 Plan 23,292,678 19,869,260 Shares of Class A common stock reserved for issuance pursuant to ESPP 9,709,326 8,541,701 Total 53,064,084 49,331,401 102 Table of Contents 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. 19. 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 In connection with the Company’s initial public offering on June 22, 2016, the 2008 Stock Option Plan, as amended and restated (the “2008 Plan”), was terminated and, accordingly, no shares were available for issuance after the termination. As of December 31, 2024 and 2023, all remaining outstanding stock options granted under the 2008 Plan were vested and exercisable and continue to be governed by the provisions of this plan. 2016 Stock Option Plan 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 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. These available shares automatically increase each January 1, beginning on January 1, 2017, by 5 % 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 January 1, 2024 and 2023, the shares available for grant under the 2016 Plan were automatically increased by 9,097,289 shares and 9,298,785 shares, respectively. 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. 2016 Employee Stock Purchase Plan The Company’s 2016 ESPP was effective on June 21, 2016. A total of 2,400,000 shares of the Company’s Class A common stock were initially reserved for issuance under the 2016 ESPP. 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 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. 103 Table of Contents 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. Stock-options and restricted stock units and awards activity under the Company’s equity incentive plans is as follows: Stock Options Number of options outstanding Weighted- average exercise price (Per share) Weighted- average remaining contractual term (In years) Aggregate intrinsic value (In thousands) Outstanding options as of December 31, 2023 1,722,861 $ 71.13 4.45 $ 56,007 Exercised ( 181,818 ) $ 23.88 Forfeited and canceled ( 218,867 ) $ 92.18 Outstanding options as of December 31, 2024 1,322,176 $ 74.15 3.05 $ 74,838 Options vested and exercisable as of December 31, 2024 1,317,265 $ 73.30 3.03 $ 74,838 Year Ended December 31, 2024 2023 2022 (In thousands, except per share amounts) Aggregate intrinsic value of stock options exercised (1) $ 8,649 $ 15,242 $ 80,839 Total estimated grant date fair value of options vested $ 9,351 $ 28,619 $ 77,403 Weighted-average grant date fair value per share of options granted $ — $ — $ 50.66 ____________________________________ ( 1 ) Aggregate intrinsic value represents the difference between the fair value of the Company’s Class A common stock as reported on the New York Stock Exchange and the exercise price of outstanding “in-the-money” options. As of December 31, 2024, total unrecognized compensation cost related to all unvested stock options was not significant. Restricted Stock Units Number of awards outstanding Weighted- average grant date fair value (Per share) Aggregate intrinsic value (In thousands) Unvested RSUs as of December 31, 2023 18,755,538 $ 87.56 $ 1,422,983 Granted 10,584,021 $ 61.86 Vested ( 6,639,672 ) $ 92.70 Forfeited and canceled ( 4,313,616 ) $ 83.09 Unvested RSUs as of December 31, 2024 18,386,271 $ 71.96 $ 1,394,966 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. 104 Table of Contents 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. 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. The vesting of the second and third tranches was based on both (a) revenue growth targets and (b) profitability targets achievement with respect to each of the years ended December 31, 2023 and 2024. If performance targets are not achieved, the related tranches are forfeited. 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 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: Year Ended December 31, Employee Stock Purchase Plan: 2024 2023 2022 Fair value of common stock $ 61.54 - $ 96.41 $ 47.36 - $ 61.55 $ 50.81 - $ 99.68 Expected term (in years) 0.50 0.50 0.50 Expected volatility 38.6 % - 41.8 % 45.8 % - 57.1 % 73.2 % - 97.3 % Risk-free interest rate 4.4 % - 5.4 % 5.3 % - 5.4 % 1.5 % - 4.5 % Dividend rate — % — % — % Stock-Based Compensation Expense The Company recorded stock-based compensation expense as follows: Year Ended December 31, 2024 2023 2022 (In thousands) Cost of revenue $ 22,001 $ 26,343 $ 21,136 Research and development 330,933 331,526 374,846 Sales and marketing 135,331 183,389 240,109 General and administrative 125,164 121,584 148,194 Restructuring costs 3,178 13,015 14,275 Total $ 616,607 $ 675,857 $ 798,560 20. Net Loss Per Share Attributable to Common Stockholders The following table sets forth the calculation of basic and diluted net loss per share attributable to common stockholders during the periods presented: Year Ended December 31, 2024 2023 2022 Net loss attributable to common stockholders (in thousands) $ ( 109,403 ) $ ( 1,015,441 ) $ ( 1,256,145 ) Weighted-average shares used to compute net loss per share attributable to common stockholders, basic and diluted 165,925,128 183,327,844 182,994,038 Net loss per share attributable to common stockholders, basic and diluted $ ( 0.66 ) $ ( 5.54 ) $ ( 6.86 ) 105 Table of Contents The following outstanding shares of common stock equivalents were excluded from the calculation of the diluted net loss per share attributable to common stockholders because their effect would have been anti-dilutive: As of December 31, 2024 2023 2022 Stock options issued and outstanding 1,322,176 1,722,861 2,277,379 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 Shares of Class A common stock committed under ESPP 265,698 426,199 766,334 Shares of Class A common stock in escrow — 31,503 31,503 Shares of Class A common stock in escrow and restricted stock awards subject to future vesting — 3,771 56,237 Total 20,327,778 21,381,913 19,076,899 ____________________________________ (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. 21. Income Taxes The following table presents domestic and foreign components of loss before provision for income taxes for the periods presented: Year Ended December 31, 2024 2023 2022 (In thousands) United States $ 40,982 $ ( 816,089 ) $ ( 1,021,208 ) International ( 129,595 ) ( 180,640 ) ( 222,424 ) Loss before provision for income taxes $ ( 88,613 ) $ ( 996,729 ) $ ( 1,243,632 ) Provision for income taxes consists of the following: Year Ended December 31, 2024 2023 2022 Current: (In thousands) Federal $ 5,617 $ 2,567 $ 3,928 State 2,305 1,533 4,100 Foreign 14,850 31,354 17,450 Total 22,772 35,454 25,478 Deferred: Federal 196 ( 1,337 ) ( 5,155 ) State 149 ( 208 ) ( 818 ) Foreign ( 2,327 ) ( 15,197 ) ( 6,992 ) Total ( 1,982 ) ( 16,742 ) ( 12,965 ) Provision for income taxes $ 20,790 $ 18,712 $ 12,513 106 Table of Contents The following table presents a reconciliation of the statutory federal tax rate and the Company's effective tax rate: Year Ended December 31, 2024 2023 2022 Tax at federal statutory rate 21 % 21 % 21 % State tax, net of federal benefit 1 3 3 Stock-based compensation ( 40 ) ( 7 ) ( 7 ) Credits 20 2 1 Foreign rate differential ( 67 ) 1 ( 2 ) Permanent book vs. tax differences 8 — — Change in valuation allowance 32 ( 23 ) ( 17 ) Other 2 1 ( 1 ) Effective tax rate ( 23 ) % ( 2 ) % ( 2 ) % Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The following table presents the significant components of the Company's deferred tax assets and liabilities: As of December 31, 2024 2023 Deferred tax assets: (In thousands) Net operating loss carryforwards $ 810,278 $ 983,652 Accruals and reserves 73,535 52,750 Stock-based compensation 28,238 29,572 Research and development credits 175,746 177,109 Intangibles 135,500 135,564 Capitalized research and development expenses 299,061 231,819 Lease liability 30,697 44,682 Investments and other basis differences 81,248 51,368 Other 18,139 31,852 Gross deferred tax assets 1,652,442 1,738,368 Valuation allowance ( 1,488,328 ) ( 1,533,933 ) Net deferred tax assets 164,114 204,435 Deferred tax liabilities: Capitalized software ( 38,394 ) ( 36,109 ) Prepaid expenses ( 900 ) ( 1,073 ) Acquired intangibles ( 55,283 ) ( 81,415 ) Right-of-use asset ( 13,112 ) ( 19,964 ) Deferred commissions ( 42,313 ) ( 50,703 ) Net deferred tax asset $ 14,112 $ 15,171 The following table summarizes the Company’s tax carryforwards, carryovers and credits: As of December 31, 2024 Expiration Date (If not utilized) (In thousands) Federal tax credits $ 151,594 Various dates beginning in 2038 Federal net operating loss carryforwards $ 2,826,042 Indefinite State net operating loss carryforwards $ 2,390,636 Various dates beginning in 2026 State tax credits $ 125,282 Various dates beginning in 2029 Foreign net operating loss carryforwards $ 846,118 Indefinite 107 Table of Contents 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 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 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: Year Ended December 31, 2024 2023 2022 (In thousands) Unrecognized tax benefit, beginning of year $ 233,778 $ 228,966 $ 223,380 Gross increases for tax positions of prior years 7,476 3,427 3,250 Gross decreases for tax positions of prior years ( 198 ) ( 5,130 ) ( 705 ) Gross increases for tax positions of current year 13,253 7,754 4,081 Lapse of statute of limitations ( 2,101 ) ( 1,239 ) ( 1,040 ) Unrecognized tax benefit, end of year $ 252,208 $ 233,778 $ 228,966 As of December 31, 2024, the Company had approximately $ 252.2 million of unrecognized tax benefits. If the $ 252.2 million is recognized, $ 3.1 million would affect the effective tax rate. The remaining amount would be offset by the reversal of related deferred tax assets which are subject to a full valuation allowance. 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. The Company files U.S. federal income tax returns as well as income tax returns in many U.S. states and foreign jurisdictions. 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. 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. federal, state and local, or non-U.S. income tax examinations by any tax authorities. On June 7, 2019, a three-judge panel from the U.S. Court of Appeals for the Ninth Circuit overturned the U.S. Tax Court's decision in Altera Corp. v. Commissioner and upheld the portion of the Treasury regulations under Section 482 of the Internal Revenue Code that requires related parties in a cost-sharing arrangement to share expenses related to share-based compensation. 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. 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. 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. 108 Table of Contents Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None.