TWILIO INC

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 unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. Certain information and note disclosures normally included in the financial statements prepared in accordance with U.S. GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these condensed consolidated financial statements should be read in conjunction with the consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K filed with the SEC on February 27, 2024 (“Annual Report”).

The condensed consolidated balance sheet as of December 31, 2023, included herein, was derived from the audited financial statements as of that date, but may not include all disclosures including certain notes required by U.S. GAAP on an annual reporting basis.

In the opinion of management, the accompanying condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, comprehensive loss, stockholders’ equity and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the full year 2024 or any future period.

(b)Principles of Consolidation

The condensed consolidated financial statements include the Company and its wholly owned subsidiaries. All 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; allocation of goodwill to reporting units; impairment assessments of goodwill and indefinite-lived intangible assets; capitalization and useful life of the Company’s capitalized internal-use software development costs; fair value 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 then current circumstances. However, future events are subject to change and best estimates and judgments may require further adjustments, therefore, actual results could differ materially from those estimates. Management periodically evaluates such estimates and they are adjusted prospectively based upon such periodic evaluation.

(d)Remaining Performance Obligations

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

(e)Deferred Revenue and Customer Deposits

As of June 30, 2024, and December 31, 2023, the Company recorded $138.7 million and $144.5 million as its deferred revenue and customer deposits, respectively. During the three months ended June 30, 2024 and 2023, the Company recognized $32.1 million and $27.2 million of revenue, respectively, that was included in the deferred revenue and customer deposits balances as of the end of the previous year. During the six months ended June 30, 2024 and 2023, the Company recognized $97.4 million and $98.6 million of revenue, respectively, that was included in the deferred revenue and customer deposits balances as of the end of the previous year.

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

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

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

(g)Restructuring Costs

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

The Company enacted workforce reduction plans in February 2023, December 2023 and March 2024. In the six months ended June 30, 2024, restructuring charges incurred and cash paid related to these plans were not significant. The estimated remaining expenses related to these plans are not expected to be significant.

(h)Recently Issued Accounting Guidance, Not yet Adopted

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 expects to adopt ASU 2023-07 upon its effective date. The adoption will require certain additional disclosure in the notes to the Company’s consolidated financial statements.

In December 2023, the FASB issued ASU 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures,” which requires disclosure of disaggregated income taxes paid, prescribes standard categories for the components of the effective tax rate reconciliation and modifies other income tax related disclosures. ASU 2023-09 is effective for annual periods beginning after December 15, 2024 and may be applied on a prospective basis. Early adoption is permitted. The Company expects to adopt ASU 2023-09 upon its effective date. The adoption will require certain additional disclosure in the notes to the Company’s consolidated financial statements.

3. Fair Value Measurements

Financial Assets

The following tables provide the financial assets measured at fair value on a recurring basis:

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 debt securities was $23.5 million and $50.6 million in the three and six months ended June 30, 2024, respectively, and $16.7 million and $33.9 million in the three and six months ended June 30, 2023, respectively. The interest is recorded as other income, net, in the accompanying condensed consolidated statements of operations.

The following table summarizes the contractual maturities of debt securities:

Strategic Investments

As of June 30, 2024 and December 31, 2023, the Company held strategic investments with a carrying value of $31.1 million and $30.7 million, respectively, recorded as other long-term assets in the accompanying condensed consolidated balance sheets. The carrying value of these securities is determined under the measurement alternative on a non-recurring basis and adjusted for observable changes in fair value or impairment. There were no significant impairments or adjustments recorded in the six months ended June 30, 2024 related to these investments. During the six months ended June 30, 2023, the Company recorded an impairment loss of $46.2 million related to one of these investments in other expenses, net, in the accompanying condensed consolidated statement of operations.

Financial Liabilities

The Company’s financial liabilities that are measured at fair value on a recurring basis consist of foreign currency derivative liabilities and are classified as Level 2 financial instruments in the fair value hierarchy. As of June 30, 2024 and December 31, 2023, the aggregate fair value of these liabilities and the associated unrealized losses were not significant.

The Company’s financial liabilities that are not measured at fair value on a recurring basis are its Senior Notes due 2029 (“2029 Notes”) and its Senior Notes due 2031 (“2031 Notes”). As of June 30, 2024, the fair values of the 2029 Notes and 2031 Notes were $453.5 million and $443.3 million, respectively. As of December 31, 2023, the fair values of the 2029 Notes and 2031 Notes were $462.4 million and $452.3 million, respectively.

4. Property and Equipment

Property and equipment consisted of the following:

(1)Data center equipment contains $72.4 million in assets held under finance leases as of June 30, 2024 and December 31, 2023. Accumulated depreciation and amortization includes $62.7 million and $55.9 million of accumulated depreciation for assets held under finance leases as of June 30, 2024, and December 31, 2023, respectively.

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

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

5. Segment Reporting

As of June 30, 2024, the Company hadtwo operating and reportable segments: Twilio Communications (“Communications”) and Twilio Segment (“Segment”).

Twilio Communications: The Communications reportable segment consists of a variety of application programming interfaces (“APIs”) and software solutions to optimize communications between Twilio customers and their end users. The key products from which the segment derives its revenue are Messaging, Voice, and Email and Marketing Campaigns.

Twilio Segment: The Segment reportable segment consists of software products that enable businesses to achieve more effective customer engagement by providing the tools necessary for customers to build direct, personalized relationships with their end users. The key product from which the segment derives its revenue is Segment.

Presented below is the discrete financial information by reportable segment for the three and six months ended June 30, 2024 and 2023, that is regularly reviewed by the CODM for performance assessment and resource allocation decisions. Prior period amounts were reclassified to conform to the current period’s presentation. Asset information is not presented below since it is not reviewed by the CODM on a segment by segment basis. Revenue, costs of revenue and operating expenses are generally directly attributable to each segment. Certain costs of revenue and operating expenses are allocated based on methodologies that best reflect the patterns of consumption of these costs. Corporate costs consist of costs that support company-wide processes and are managed on the company-wide level, and include costs related to corporate governance and communication, global brand awareness, information security, and certain legal, human resources, finance and accounting expenses.

6. Derivatives and Hedging

As of June 30, 2024, the Company had outstanding foreign currency forward contracts designated as cash flow hedges with a total sell notional value of $186.1 million. The notional value represents the amount that will be sold upon maturity of the forward contract. As of June 30, 2024, these contracts had maturities of up to 17 months. 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 condensed 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 June 30, 2024, the Company did not have any offsetting arrangements.

7. Goodwill and Intangible Assets

Goodwill

As of June 30, 2024 and December 31, 2023, the balance of the Company’s goodwill was $5.2 billion, of which $4.9 billion relates to the Communications reportable segment and $306.1 million relates to the Segment reportable segment. There was no goodwill activity during the six months ended June 30, 2024.

Intangible assets

Intangible assets consisted of the following:

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

Total estimated future amortization expense is as follows:

8. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following:

9. Long-Term Debt

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

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

10. Revenue by Geographic Area

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:

11. Commitments and Contingencies

(a)Lease and Other Commitments

The Company has entered into various non-cancelable operating lease agreements for its facilities. In the three and six months ended June 30, 2024, the Company did not enter into any significant new lease agreements.

The Company has non-cancelable contractual commitments with its cloud infrastructure provider, network service providers and other vendors. In the three and six months ended June 30, 2024, the Company entered into several such agreements with terms up tothree years for a total purchase commitment of $25.6 million and $40.8 million, respectively.

(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 the Company believes that a loss is probable and that it can reasonably estimate the amount of any such loss. To the extent there is a reasonable possibility that a loss exceeding amounts already recognized may be incurred and the amount of such additional loss would be material, the Company will either disclose the estimated additional loss or state that such an estimate cannot be made. Significant judgment is required to determine the probability of a loss and to estimate the amount of any probable loss.

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

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

(d)Other Taxes

The Company conducts operations in multiple tax jurisdictions within and outside of 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 could be reasonably estimated. These reserves are based on estimates which include several key assumptions including, but not limited to, the taxability of the Company’s services, the jurisdictions in which its management believes it had nexus and the sourcing of revenues to those jurisdictions.

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 June 30, 2024, the liabilities recorded for the non-income-based taxes were $18.6 million for domestic jurisdictions and $20.2 million for jurisdictions outside of the United States. As of December 31, 2023, these liabilities were $18.0 million and $22.2 million, respectively.

12. Stockholders' Equity

Preferred Stock

As of June 30, 2024, and December 31, 2023, the Company had authorized 100,000,000 shares of preferred stock, par value $0.001, of whichno shares were issued and outstanding.

Common Stock

As of June 30, 2024, the Company had authorized 1,000,000,000 shares of Class A common stock and 3,170,181 shares of Class B common stock, each with a par value of $0.001 per share. As of June 30, 2024,164,150,089 shares of Class A common stock andno shares of Class B common stock were issued and outstanding.

As of December 31, 2023, the Company had authorized 1,000,000,000 shares of Class A common stock and 3,170,181 shares of Class B common stock, each with a par value of $0.001 per share. As of December 31, 2023,181,945,771 shares of Class A common stock andno shares of Class B common stock were issued and outstanding.

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

Share Repurchase Programs

In February 2023, the board of directors of the Company authorized a repurchase of up to $1.0 billion in aggregate value of its outstanding Class A common stock through a share repurchase program. In March 2024, the board of directors of the Company authorized a second share repurchase program for an additional $2.0 billion in aggregate value of its outstanding Class A common stock. Repurchases under these programs can be made through open market, private transactions or other means, in compliance with applicable federal securities laws, and could include repurchases pursuant to Rule 10b5-1 trading plans. The Company has discretion in determining the conditions under which shares may be repurchased from time to time. Both programs expire on December 31, 2024.

In the three months ended June 30, 2024 and 2023, the Company repurchased 15.2 million and 6.4 million shares of its Class A common stock, respectively, for an aggregate purchase price of $898.6 million and $370.0 million, respectively. In the six months ended June 30, 2024 and 2023, the Company repurchased 21.4 million and 8.3 million shares of its Class A common stock, respectively, for an aggregate purchase price of $1.3 billion and $495.0 million, respectively. As of June 30, 2024, approximately $1.0 billion of the aggregate amount authorized under the stock repurchase programs remained available for future repurchases.

13. Stock-Based Compensation

The Company’s 2016 Stock Option and Incentive Plan (the “2016 Plan”) provides for granting stock options, restricted stock units, restricted stock awards, stock appreciation rights, unrestricted stock awards, performance share awards, dividend equivalent rights and cash-based awards to its employees, directors and consultants. Certain of the Company’s outstanding equity awards were granted under equity incentive plans that are no longer active but continue to govern the outstanding equity awards granted thereunder.

In the second quarter of 2024, the Company granted performance-based restricted stock units (“PSUs”) covering 516,626 shares that had an aggregate grant date fair value of $34.5 million to certain of its executive employees. The PSUs will vest if certain operational performance or market conditions, as defined in the grant agreements, are met during the performance achievement period, which expires on December 31, 2026. The fair value of the portion of the PSUs with an operational performance target equals 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 and only if it is probable that the performance target will be achieved during the performance period. The probability of achievement is assessed each reporting period and adjustments are recorded accordingly. The fair value of the portion of the PSUs with market conditions was determined using a Monte-Carlo simulation model and the expense is recognized on a straight-line basis over the performance achievement period. At the end of the vesting period the number of shares actually issued may range from 0% to 200% of the target based on levels of performance.

In addition, pursuant to the Company’s 2016 Employee Stock Purchase Plan (“ESPP”), eligible employees may purchase shares of the Company’s Class A common stock at a discount of 15% through payroll deductions of their eligible compensation. The ESPP provides for separatesix-month offering periods beginning in May and November of each year.

As of June 30, 2024, total unrecognized compensation cost related to unvested restricted stock units was $1.5 billion which will be amortized over a weighted-average period of 2.9 years. As of June 30, 2024, total unrecognized compensation cost related to unvested stock options, the ESPP, and shares of Class A common stock in escrow subject to future vesting was not significant.

Stock-Based Compensation Expense

The Company recorded total stock-based compensation expense as follows:

14. 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:

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:

15. Income Taxes

The Company has historically computed its provision for income taxes for interim periods using an estimated annual effective tax rate (“AETR”) based on anticipated annual pretax income or loss, which was adjusted for discrete items recorded in the period. However, due to the level of forecasted provision for income taxes relative to the forecasted pre-tax income used in computing the effective tax rate, the effective tax rate is highly sensitive to fluctuations in pre-tax income and does not provide a reasonable estimate for income taxes in the interim period. As such, the Company computed its provision for income taxes based on the year-to-date actual effective tax rate for the three and six months ended June 30, 2024. The Company plans to revert to applying a forecasted annual effective tax rate to year-to-date earnings and adjusting for discrete items once that method produces more reasonable results. The primary difference between the Company’s effective tax rate and the federal statutory rate is the full valuation allowance the Company has established on its federal, state and certain foreign net operating losses and credits.

The provision for income taxes recorded in the three months ended June 30, 2024 consists primarily of federal, state and foreign income taxes and withholding taxes in foreign jurisdictions in which the Company conducts business. The provision for income taxes recorded in the six months ended June 30, 2024 consists primarily of the same factors and also income tax expense from a foreign audit settlement.

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

The Company is subject to taxation in the U.S. and various other state and foreign jurisdictions. Because the Company has net operating loss carryforwards for U.S. federal and state jurisdictions, the statute of limitations is open for all tax years.

16. Related Party Transactions

In May 2022, the Company and Syniverse Corporation (“Syniverse”), an equity method investee, entered into a wholesale agreement pursuant to which Syniverse would process, route and deliver application-to-person messages originating and/or terminating between the Company’s customers and mobile network operators. For the three and six months ended June 30, 2024, the value of the transactions that occurred between the Company and Syniverse were $35.2 million and $69.2 million, respectively. For the three and six months ended June 30, 2023, the value of the transactions that occurred between the Company and Syniverse were $37.3 million and $70.3 million, respectively. These transactions were recorded as cost of revenue in the accompanying condensed consolidated statements of operations.

Special Note Regarding Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), which statements involve substantial risks and uncertainties. Forward-looking statements generally relate to future events or our future financial or operating performance. In some cases, you can identify forward-looking statements because they contain words such as “may,” “can,” “will,” “would,” “should,” “expects,” “plans,” “anticipates,” “could,” “intends,” “target,” “projects,” “contemplates,” “believes,” “estimates,” “predicts,” “forecasts,” “potential,” or “continue” or the negative of these words or other similar terms or expressions that concern our expectations, strategy, plans or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

•the impact of macroeconomic uncertainties and significant market volatility in the global economy on our customers, partners, employees and business;

•our future financial performance, including expectations regarding our revenue, revenue growth, cost of revenue, gross profit, gross margin and operating expenses, our ability to generate positive cash flow and ability to achieve and sustain profitability on GAAP and non-GAAP bases, the factors affecting our results of operations, the timing of future expenses, the end dates for certain types of expenses, and the assumptions underlying such expectations;

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

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

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

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

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

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

•our ability to maintain reliable service levels for our customers;

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

•the anticipated results of our foreign currency hedging activities;

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

•potential harm caused by compromises in security, data and infrastructure, including cybersecurity protections;

•our ability to comply with modified or new industry standards, laws and regulations applying to our business;

•our ability to make progress on our environmental, social and governance (“ESG”) programs, goals and commitments;

•our ability to manage changes in network service provider fees that we pay in connection with the delivery of communications on our platform;

•investments and costs required to prevent, detect and remediate potential cybersecurity threats, incidents and breaches of ours or our customers’ systems or information;

•our ability to optimize our network service provider coverage and connectivity;

•our ability to work closely with email inbox service providers to maintain deliverability rates;

•the impact and expected results from changes in our relationships with our larger customers;

•our ability to form and expand partnerships with technology partners and consulting partners;

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

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

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

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

•our expectations regarding our share repurchase programs;

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

•our ability to successfully defend litigation brought against us;

•our ability to service the interest on our 3.625% senior notes due 2029 (“2029 Notes”) and on our 3.875% notes due 2031 (“2031 Notes,” and together with the 2029 Notes, the “Notes”), and repay such Notes;

•our customers’ and other platform users’ violation of our policies or other misuse of our platform; and

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

We caution you that the foregoing list may not contain all of the forward-looking statements made in this Quarterly Report on Form 10-Q.

You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, results of operations and financial condition. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described below in Part II, Item 1A, “Risk Factors,” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time, and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. We cannot assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.

The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements, and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.