What changed in this filing

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Item 2. Management’s Discussion and Analysis

2025-08-08 compared with 2025-05-02 · 140 added, 62 removed, 347 unchanged (37% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2024.

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with our unaudited condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and our audited consolidated financial statements included in our Annual Report on Form 10-K for the year ended December 31, 2024.

In addition to historical financial information, the following discussion contains forward-looking statements that are based upon current plans, expectations and beliefs that involve risks and uncertainties.

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We offer communications APIs that enable developers to embed numerous forms of messaging, voice, email and video interactions into their customer-facing applications, as well as software products that target specific engagement needs, including our customer data platform, digital engagement centers, marketing campaigns, and user authentication and identity solutions.

This combination of flexible APIs and software solutions helps businesses of all sizes and across numerous industries to benefit from smarter and more streamlined engagement at every step of the customer journey, including reduced customer acquisition costs, lasting loyalty and increased customer value.

This combination of flexible APIs and software solutions helps businesses of all sizes and across numerous industries benefit from smarter and more streamlined engagement at every step of the customer journey, including reduced customer acquisition costs, lasting loyalty and increased customer value.

Our platform, which combines our highly customizable communications APIs with customer data management capabilities and AI-powered predictions and recommendations, allows businesses to break down data silos and build a comprehensive single source for their customer data that is organized into unique profiles that are easily accessible by all their business teams.

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We believe that operating as one organization best positions us as we seek to deliver one trusted, smart and integrated platform that enables more personalized communications and engagements for customers.

Despite realigning our organizational structure, we continue to have two reportable segments.

Despite realigning our organizational structure, we have continued to have two reportable segments.

Our Communications reportable segment consists of a variety of APIs and software solutions to optimize communications between our customers and their end users.

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Our key offering in our Segment reportable segment is our Segment product.

In the three months ended March 31, 2025 and 2024, our revenue was $1.17 billion and $1.05 billion, respectively, and our net income (loss) was $20.0 million and $(55.3) million, respectively.

In the three months ended March 31, 2025 and 2024, our 10 largest Active Customer Accounts generated an aggregate of 9% and 10% of our total revenue, respectively.

In the three months ended June 30, 2025 and 2024, our revenue was $1.23 billion and $1.08 billion, respectively, and our net income (loss) was $22.4 million and $(31.9) million, respectively.

In the three months ended June 30, 2025 and 2024, our 10 largest Active Customer Accounts generated an aggregate of 9% and 10% of our total revenue, respectively.

Factors Affecting Our Results of Operations

We are focused on innovation, profit, and growth.

To increase revenue and grow market share, we intend to drive product innovation, leverage predictive and generative AI, further enhance our independent software vendor (“ISV”), reseller and other partner relationships, improve our self-service capabilities, cross-sell our products, expand internationally, enhance Segment data warehouse interoperability, and reduce time to value for Segment.

We are focused on innovation and durable, profitable growth.

We also intend to optimize our business and take measures to reduce costs, including simplifying and further automating our business processes, modernizing our infrastructure, focusing on self-service, leveraging AI, enacting certain workforce planning initiatives, optimizing utilization of our distributed workforce and implementing other initiatives targeted at improving efficiencies in our business.

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Our gross profit and gross margin are impacted by a number of factors, including our product mix;

our ability to manage our cloud infrastructure‑related and network service provider fees, including A2P SMS fees;

our ability to manage our cloud infrastructure‑related and network service provider fees, including A2P messaging fees;

changes in foreign exchange rates;

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messaging termination compared to international messaging termination, as international messaging has lower gross margins.

In June 2025, a major U.S.

mobile carrier increased network service provider fees for A2P messages delivered to its subscribers.

We pass these fees through to our customers at cost.

As a result, we recognize an equal amount of revenue and cost

of revenue related to these fees.

The increased fees do not impact our gross profit, but they will create a modest headwind to our gross margins going forward.

mobile carriers may follow suit, and such fees may increase over time.

Our results of operations have in the past been, and could in the future be, impacted by adverse macroeconomic conditions.

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

The following table summarizes our year-over-year revenue growth and Dollar-Based Net Expansion Rate for the three months ended March 31, 2025 and 2024, and the number of Active Customer Accounts as of March 31, 2025 and 2024.

The following table summarizes our year-over-year revenue growth and Dollar-Based Net Expansion Rate for the three months ended June 30, 2025 and 2024, and the number of Active Customer Accounts as of June 30, 2025 and 2024.

Three Months Ended

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Due to this dynamic, we believe that the number of Active Customer Accounts, as currently defined, is less informative now as an indicator of the growth of our business and future revenue trends than it has been in prior periods.

In the three months ended March 31, 2025 and 2024, revenue from Active Customer Accounts represented over 99% of total revenue in each period.

In the three months ended June 30, 2025 and 2024, revenue from Active Customer Accounts represented over 99% of total revenue in each period.

Dollar‑Based Net Expansion Rate

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

Communications Dollar-Based Net Expansion Rate and Segment Dollar-Based Net Expansion Rate are calculated using the same methodology, but using only revenue attributable to the respective segment and Active Customer Accounts and customer accounts from Zipwhip.

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

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An important way in which we have historically tracked performance in this area is by measuring the Dollar-Based Net Expansion Rate for Active Customer Accounts.

Based Net Expansion Rate increases when such Active Customer Accounts increase their usage of a product, extend their usage of a product to new applications or adopt a new product.

Our Dollar-Based Net Expansion Rate increases when such Active Customer Accounts increase their usage of a product, extend their usage of a product to new applications or adopt a new product.

Our Dollar-Based Net Expansion Rate decreases when such Active Customer Accounts cease or reduce their usage of a product or when we lower usage prices on a product.

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Usage-based customers subject to such contracts are typically invoiced monthly in arrears for products used.

In the three months ended March 31, 2025 and 2024, we generated 73% and 71% of our revenue, respectively, from usage-based fees.

In the three months ended June 30, 2025 and 2024, we generated 74% and 71% of our revenue, respectively, from usage-based fees.

Subscription-based fees are earned in accordance with subscription pricing terms.

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Subscription customers are generally invoiced in advance at the start of the contract term.

In the three months ended March 31, 2025 and 2024, we generated 27% and 29% of our revenue, respectively, from non-usage‑based fees.

In the three months ended June 30, 2025 and 2024, we generated 26% and 29% of our revenue, respectively, from non-usage‑based fees.

Amounts that have been charged via credit card or invoiced are recorded in revenue, deferred revenue or customer deposits, depending on whether the revenue recognition criteria have been met.

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

Our arrangements with network service providers require us to pay fees based on the volume of phone calls initiated or text messages sent, as well as the number of telephone numbers acquired by us to service our customers.

Our arrangements with network service providers require us to pay fees, including based on the volume of phone calls initiated or text messages sent, as well as the number of telephone numbers acquired by us to service our customers.

Our arrangements with our cloud infrastructure providers require us to pay fees based on our server capacity consumption.

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A significant portion of general and administrative costs, such as costs related to corporate governance and certain costs related to legal, human resources, finance and accounting functions, are not allocated to segments because they support company-wide processes and are managed on a company-wide level.

Other Income (Expenses), Net

Our other income (expenses), net, consist primarily of our share of losses from our equity method investment, impairment charges and gains and losses related to our strategic investments, realized gains and losses from marketable securities, interest income and expense and debt-related costs.

Other (Expenses) Income, Net

Our other (expenses) income, net, consist primarily of our share of losses from our equity method investment, impairment charges and gains and losses related to our strategic investments, realized gains and losses from marketable securities, interest income and expense and debt-related costs.

Provision for Income Taxes

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Free cash flow margin 21 % 18 %

Net cash (used in) provided by investing activities

Net cash provided by investing activities

$ 402,019 $ 784,614

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

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2025 2024 2025 2024

Condensed Consolidated Statements of Operations Data:

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36,989 (19,037) 60,071 (62,541)

Other income (expenses), net:

Other (expenses) income, net:

Share of losses from equity method investment (25,222) (23,940) (44,693) (53,515)

Other income, net 21,825 16,734 44,798 44,652

Total other income (expenses), net 3,502 (1,657)

Total other (expenses) income, net

(3,397) (7,206) 105 (8,863)

Income (loss) before provision for income taxes

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$ 0.15 $ (0.19) $ 0.28 $ (0.50)

$ 0.12 $ (0.31)

Weighted-average shares used to compute net income (loss) per share:

153,345,192 181,017,726

Diluted $ 0.14 $ (0.19) $ 0.26 $ (0.50)

Weighted-average shares used to compute net income (loss) per

153,228,766 170,222,104 153,273,594 175,613,672

Diluted 159,691,758 170,222,104 160,729,638 175,613,672

__________________________________

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

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2025 2024 2025 2024

(In thousands)

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(2) Includes amortization of acquired intangibles as follows:

Three Months Ended

Three Months Ended Six Months Ended

June 30, June 30,

2025 2024 2025 2024

(In thousands)

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

Three Months Ended

Condensed Consolidated Statements of Operations, as a percentage of revenue:

Three Months Ended Six Months Ended

June 30, June 30,

2025 2024 2025 2024

Condensed Consolidated Statements of Operations, as a

percentage of revenue:

Revenue 100 % 100 % 100 % 100 %

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Income (loss) from operations

Other income (expenses), net

Other (expenses) income, net

Share of losses from equity method investment (2) (2) (2) (3)

Other income, net 2 2 2 2

Total other income (expenses), net * *

Total other (expenses) income, net * (1) * *

Income (loss) before provision for income taxes

Provision for income taxes

(1) (1) (1) (1)

Net income (loss) attributable to common stockholders

2 % (3 %) 2 % (4 %)

____________________________________

* Less than 0.5% of revenue.

** Columns may not sum due to rounding.

Comparison of the Three Months Ended March 31, 2025 and 2024

Comparison of the Three Months Ended June 30, 2025 and 2024

Three Months Ended

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Consolidated total revenue $ 1,228,425 $ 1,082,502 $ 145,923 13 %

In the three months ended March 31, 2025, Communications revenue increased by $124.8 million, or 13%, compared to the same period last year.

In the three months ended June 30, 2025, Communications revenue increased by $145.7 million, or 14%, compared to the same period last year.

This increase was primarily attributable to the increased usage of our Communications products by our existing customers, as reflected in our Communications Dollar‑Based Net Expansion Rate of 109%, as well as an increase of $55.2 million in revenue derived from our new Communications Active Customer Accounts.

In the three months ended March 31, 2025, Segment revenue increased by $0.6 million, or 1%, compared to the same period last year.

In the three months ended June 30, 2025, Segment revenue increased by $0.3 million, or nearly flat, compared to the same period last year.

This increase was primarily attributable to an increase of $4.0 million in revenue derived from our new Segment Active Customer Accounts, partially offset by the decreased usage of our Segment products due to churn and contraction affecting our existing customers, as reflected in our Segment Dollar-Based Net Expansion Rate of 95%.

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$ 602,740 $ 555,845 $ 46,895 8 %

In the three months ended March 31, 2025, cost of revenue increased by $87.9 million, or 17%, compared to the same period last year.

In the three months ended June 30, 2025, cost of revenue increased by $99.0 million, or 19%, compared to the same period last year.

The increase was primarily attributable to a $94.5 million increase in network service provider costs, net of the impact of hedging instruments.

In the three months ended March 31, 2025, gross profit increased by $37.5 million, or 7%, compared to the same period last year.

In the three months ended June 30, 2025, gross profit increased by $46.9 million, or 8%, compared to the same period last year.

This increase was attributable to the factors impacting our revenue and cost of revenue, as described above.

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Total operating expenses $ 565,751 $ 574,882 $ (9,131) (2) %

In the three months ended March 31, 2025, research and development expenses decreased by $6.2 million, or 2%, compared to the same period last year.

In the three months ended June 30, 2025, research and development expenses increased by $0.7 million, or nearly flat, compared to the same period last year.

Fluctuations in the various research and development expense categories were not significant either individually or in the aggregate.

In the three months ended March 31, 2025, sales and marketing expenses decreased by $2.4 million, or 1%, compared to the same period last year.

In the three months ended June 30, 2025, sales and marketing expenses increased by $2.9 million, or 1%, compared to the same period last year.

Fluctuations in the various sales and marketing expense categories were not significant either individually or in the aggregate.

In the three months ended March 31, 2025, general and administrative expenses decreased by $20.5 million, or 18%, compared to the same period last year.

The decrease was primarily attributable to an $8.7 million decrease in stock-based compensation expense, a $6.3 million decrease in professional services fees and a $3.8 million decrease in the provision for doubtful accounts.

Other Income (Expenses), net

In the three months ended June 30, 2025, general and administrative expenses decreased by $12.7 million, or 11%, compared to the same period last year.

The decrease was primarily attributable to a $13.1 million decrease in charitable contributions that we made through Twilio.org.

Other Expenses, net

Three Months Ended

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21,825 16,734 5,091 30 %

Total other income (expenses), net

Total other expenses, net

$ (3,397) $ (7,206) $ 3,809 (53) %

In the three months ended March 31, 2025, other income (expenses), net, increased by $5.2 million, or 311%, compared to the same period last year.

The increase was primarily attributable to a $10.1 million decrease in our share of losses from our equity method investment, partially offset by a $4.9 million decrease in other income, net, primarily related to the income earned on our debt securities.

In the three months ended June 30, 2025, other expenses, net, decreased by $3.8 million, or 53%, compared to the same period last year.

The decrease was primarily attributable to a $5.1 million increase in other income, net, primarily driven by unrealized gains from fluctuations in foreign currency exchange rates, partially offset by a $1.3 million increase in our share of losses from our equity method investment.

Segment Results of Operations

The following table presents the results for non-GAAP income (loss) from operations, as reviewed by our CODM, for each of our Communications and Segment reportable segments for the three months ended March 31, 2025 and 2024:

Three Months Ended

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$ 6,009 $ (15,815) 21,824 138 %

In the three months ended March 31, 2025, Communications non-GAAP income from operations increased by $28.5 million, or 11%, compared to the same period last year.

The increase was driven by an increase in Communications revenue of $124.8 million, as described in the Revenue section above, and was partially offset by a $76.7 million increase in network service provider costs, net of the impact of hedging instruments, a $13.4 million increase in hosting fees, and an $8.1 million increase in total personnel costs.

In the three months ended March 31, 2025, Segment non-GAAP loss from operations decreased by $19.5 million, or 93%, compared to the same period last year.

The decrease was driven by a decrease in Segment operating expenses of $21.8 million primarily attributable to a decrease in total personnel costs and an increase in Segment revenue of $0.6 million, as described in the Revenue section above, partially offset by a $3.0 million increase in hosting fees.

In the three months ended June 30, 2025, Communications non-GAAP income from operations increased by $30.7 million, or 12%, compared to the same period last year.

The increase was driven by an increase in Communications revenue of $145.7 million, as described in the Revenue section above, and was partially offset by a $94.5 million increase in network service provider costs, net of the impact of hedging instruments, a $10.5 million increase in hosting fees, which support the growth in usage of our products by our new and existing customers, and a $14.6 million increase in total personnel costs.

In the three months ended June 30, 2025, Segment non-GAAP income from operations increased by $21.8 million, or 138%, compared to the same period last year.

The increase was driven by a decrease in Segment operating expenses of $20.9 million primarily attributable to a decrease in total personnel costs.

Comparison of the Six Months Ended June 30, 2025 and 2024

Six Months Ended

2025 2024 Change

(Dollars in thousands)

Twilio Communications $ 2,249,762 $ 1,979,308 $ 270,454 14%

Twilio Segment 151,126 150,244 882 1%

Consolidated total revenue $ 2,400,888 $ 2,129,552 $ 271,336 13%

In the six months ended June 30, 2025, Communications revenue increased by $270.5 million, or 14%, compared to the same period last year.

This increase was primarily attributable to the increased usage of our Communications products by our existing customers, as reflected in our Communications Dollar‑Based Net Expansion Rate of 108%, as well as an increase of $106.2 million in revenue derived from our new Communications Active Customer Accounts.

In the six months ended June 30, 2025, Segment revenue increased by $0.9 million, or 1%, compared to the same period last year.

This increase was primarily attributable to an increase of $9.0 million in revenue derived from our new Segment Active Customer Accounts, partially offset by the decreased usage of our Segment products due to churn and contraction affecting our existing customers, as reflected in our Segment Dollar‑Based Net Expansion Rate of 95%.

Cost of Revenue and Gross Profit

Six Months Ended

2025 2024 Change

(Dollars in thousands)

Cost of revenue $ 1,216,581 $ 1,029,666 $ 186,915 18 %

$ 1,184,307 $ 1,099,886 $ 84,421 8 %

In the six months ended June 30, 2025, cost of revenue increased by $186.9 million, or 18%, compared to the same period last year.

This increase was primarily attributable to a $171.2 million increase in network service providers’ costs, net of the impact of hedging instruments and a $27.0 million increase in hosting fees, which support the growth in usage of our products by our new and existing customers, partially offset by an $8.1 million decrease in customer support costs primarily attributable to a decrease in personnel costs.

In the six months ended June 30, 2025, gross profit increased by $84.4 million, or 8%, compared to the same period last year.

The increase was attributable to the factors impacting our revenue and cost of revenue, as described above.

Operating Expenses

Six Months Ended

2025 2024 Change

(Dollars in thousands)

Research and development $ 497,790 $ 503,242 $ (5,452) (1) %

Sales and marketing 432,837 432,328 509 — %

General and administrative 193,609 226,857 (33,248) (15) %

Total operating expenses $ 1,124,236 $ 1,162,427 $ (38,191) (3) %

In the six months ended June 30, 2025, research and development expenses decreased by $5.5 million, or 1%, compared to the same period last year.

Fluctuations in the various research and development expense categories were not significant either individually or in the aggregate.

In the six months ended June 30, 2025, sales and marketing expenses increased by $0.5 million, flat compared to the same period last year.

Fluctuations in the various sales and marketing expense categories were not significant either individually or in the aggregate.

In the six months ended June 30, 2025, general and administrative expenses decreased by $33.2 million, or 15%, compared to the same period last year.

The decrease was primarily attributable to an $11.6 million decrease in charitable contributions that we made through Twilio.org, a $10.7 million decrease in the provision for doubtful accounts and a $9.8 million decrease in professional services fees.

Other Income (Expenses), net

Six Months Ended

2025 2024 Change

(Dollars in thousands)

Share of losses from equity method investment $ (44,693) $ (53,515) $ 8,822 (16) %

Other income, net

44,798 44,652 $ 146 — %

Total other income (expenses), net

$ 105 $ (8,863) $ 8,968 101 %

In the six months ended June 30, 2025, other income (expenses), net increased by $9.0 million, or 101%, compared to the same period last year.

The increase is primarily attributable to a decrease of $8.8 million in our share of losses from our equity method investment.

Segment Results of Operations

Six Months Ended

2025 2024 Change

(Dollars in thousands)

Twilio Communications $ 558,077 $ 498,940 $ 59,137 12 %

Twilio Segment

$ 4,491 $ (36,809) $ 41,300 112 %

In the six months ended June 30, 2025, Communications non-GAAP income from operations increased by $59.1 million, or 12%, compared to the same period last year.

The increase was driven by an increase in Communications revenue of $270.5 million, or 14%, as described in the Revenue section above, and was partially offset by a $171.2 million increase in network service provider costs, net of the impact of hedging instruments, a $22.7 million increase in total personnel costs, and a $23.9 million increase in hosting fees, which support the growth in usage of our products by our new and existing customers.

In the six months ended June 30, 2025, Segment non-GAAP income from operations increased by $41.3 million, or 112%, compared to the same period last year.

The increase was driven by a decrease in Segment operating expenses of $42.7 million primarily attributable to a decrease in total personnel costs.

Liquidity and Capital Resources

As of March 31, 2025, we had cash and cash equivalents of $467.1 million and short-term marketable securities of $2.0 billion.

As of June 30, 2025, we had cash and cash equivalents of $969.2 million and short-term marketable securities of $1.6 billion.

Cash equivalents consist of money market funds, commercial paper and U.S.

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Short-term marketable securities consist primarily of U.S.

treasury securities, non-U.S.

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

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

The cash and cash equivalents and short-term marketable securities are held for working capital purposes.

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Our principal contractual and other commitments consist of obligations under our 2029 Notes and 2031 Notes, our operating leases for office space that we occupy, sublease or hold to sublease, and contractual commitments to our cloud infrastructure and network service providers.

Refer to Note 9 and Note 11(a) to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for discussions of our obligations and commitments related to leases, debt and other purchase obligations.

Refer to Note 9 and Note 11(a) to our unaudited condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q for discussions of our obligations and commitments related to leases, debt and other purchase obligations.

We may, from time to time, consider acquisitions of, or investments in, complementary businesses, products, services, capital infrastructure or technologies which might affect our liquidity requirements or cause us to secure additional financing or issue additional equity or debt securities.

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The program expires on December 31, 2027.

In the three months ended March 31, 2025, we purchased $130.2 million in aggregate value, or 1.2 million shares, of our Class A common stock on the open market.

In the three and six months ended June 30, 2025, we purchased $176.7 million in aggregate value, or 1.8 million shares, and $306.9 million in aggregate value, or 3.0 million shares, respectively, of our Class A common stock on the open market.

2029 Notes and 2031 Notes

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The following table summarizes our cash flows:

Three Months Ended

Six Months Ended

(In thousands)

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$ 468,126 $ 403,466

Cash (used in) provided by investing activities

Cash provided by investing activities

382,879 974,384

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Cash Flows from Operating Activities

In the three months ended March 31, 2025, cash provided by operating activities consisted primarily of our net income of $20.0 million adjusted for non-cash items, including $139.3 million of stock-based compensation expense, $49.6 million of depreciation and amortization expense, $19.5 million of our share of losses from an equity method investment, $19.3 million of amortization of deferred commissions, $5.2 million of non-cash reduction in our operating right-of-use asset, and $65.7 million of cumulative changes in operating assets and liabilities.

In the six months ended June 30, 2025, cash provided by operating activities consisted primarily of our net income of $42.4 million adjusted for non-cash items, including $288.5 million of stock-based compensation expense, $99.4 million of depreciation and amortization expense, $44.7 million of our share of losses from an equity method investment, $38.4 million of amortization of deferred commissions, $10.5 million of non-cash reduction in our operating right-of-use asset, and $59.8 million of cumulative changes in operating assets and liabilities.

With respect to changes in operating assets and liabilities, accounts receivable and prepaid expenses decreased $81.6 million primarily due to timing of cash receipts and prepayments of certain operating expenses.

Accounts payable and other current liabilities decreased $86.4 million primarily driven by the payment of the 2024 company-wide bonus in the three months ended March 31, 2025.

Accounts payable and other current liabilities decreased $64.4 million primarily driven by the payment of the 2024 company-wide bonus in the six months ended June 30, 2025.

Other long-term assets increased $51.4 million primarily due to an increase in long-term prepayments to support our business.

Operating lease liabilities decreased $18.7 million due to payments made against our operating lease obligations.

In the three months ended March 31, 2024, cash provided by operating activities consisted primarily of our net loss of $55.3 million adjusted for non-cash items, including $158.6 million of stock-based compensation expense, $53.3 million of depreciation and amortization expense, $18.8 million of amortization of deferred commissions, $29.6 million of share of losses from equity method investments and $25.1 million of cumulative changes in operating assets and liabilities.

In the six months ended June 30, 2024, cash provided by operating activities consisted primarily of our net loss of $87.2 million adjusted for non-cash items, including $306.3 million of stock-based compensation expense, $105.4 million of depreciation and amortization expense, $37.8 million amortization of deferred commissions, $53.5 million of share of losses from equity method investments and $32.7 million of cumulative changes in operating assets and liabilities.

With respect to changes in operating assets and liabilities, accounts receivable and prepaid expenses decreased $30.8 million primarily due to timing of cash receipts and pre-payments of certain operating expenses.

Accounts payable and other current liabilities decreased $35.4 million primarily driven by timing of payments to vendors.

Operating lease liabilities decreased $24.2 million due to payments made against our operating lease obligations.

Cash Flows from Investing Activities

In the three months ended March 31, 2025, cash used in investing activities was $19.1 million consisting of $11.6 million related to capitalized software development costs, $6.4 million of purchases of marketable securities and other investments, net of proceeds from sales and maturities of marketable securities, and $1.2 million related to purchases of long-lived assets.

In the three months ended March 31, 2024, cash provided by investing activities was $189.8 million, primarily consisting of $202.6 million of maturities and sales of marketable securities, net of purchases, partially offset by $11.2 million related to capitalized software development costs and $1.7 million related to purchases of long-lived assets.

In the six months ended June 30, 2025, cash provided by investing activities was $382.9 million, primarily consisting of $409.2 million of maturities and sales of marketable securities, net of purchases, partially offset by $24.2 million related to capitalized software development costs, and $2.2 million related to purchases of long-lived assets.

In the six months ended June 30, 2024, cash provided by investing activities was $974.4 million, primarily consisting of $1.0 billion of maturities and sales of marketable securities, net of purchases, partially offset by $25.8 million related to capitalized software development costs and $2.8 million related to purchases of long-lived assets.

Cash Flows from Financing Activities

In the three months ended March 31, 2025, cash used in financing activities was $125.8 million primarily consisting of $126.3 million of cash paid to repurchase 1.2 million shares of our Class A common stock in the open market, including related costs.

In the three months ended March 31, 2024, cash used in financing activities was $363.2 million, primarily consisting of $356.9 million of cash paid to repurchase 6.1 million shares of our Class A common stock in the open market, including related costs.

In the six months ended June 30, 2025, cash used in financing activities was $301.7 million primarily consisting of $323.2 million of cash paid to repurchase 3.0 million shares of our Class A common stock in the open market, including related costs, offset by $25.9 million in proceeds from exercises of stock options and shares of Class A common stock issued under the Company’s ESPP.

In the six months ended June 30, 2024, cash used in financing activities was $1.3 billion, primarily consisting of $1.3 billion of cash paid to repurchase 21.4 million shares of our Class A common stock in the open market, including related costs.

Critical Accounting Policies and Estimates

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What changed 10-Q

Item 2. Management’s Discussion and Analysis