TWILIO INC

Previous wording

We operate our business in two business units: Communications and Segment. Our Communications business consists of a variety of APIs and software solutions to optimize communications between our customers and their end users. Our key Communications offerings include Messaging, Voice, Flex, Email and Marketing Campaigns, and User Identity and Authentication. Our Segment business consists of software products that enable businesses to leverage their first-party data to create unique customer profiles and achieve more effective customer engagement. Together, our Communications and Segment products power our customer engagement platform. We believe that our two business units are complementary and address adjacent needs and related problems for our customers. Our goal is to create a flywheel for effective customer engagement by combining Segment’s user profiles with our rich Communications data to drive more personalized and intelligent customer interactions. We believe that our business unit structure enables each business unit to execute toward its respective goals with appropriate focus and independence, best positioning us to achieve our long-term plan of creating the leading customer engagement platform.

Current wording

We operate our business in two business units: Communications and Segment. Our Communications business consists of a variety of APIs and software solutions to optimize communications between our customers and their end users. Our key Communications offerings include Messaging, Voice, Flex, Email and Marketing Campaigns, and User Identity and Authentication. Our Segment business consists of software products that enable businesses to leverage their first-party data to create unique customer profiles and achieve more effective customer engagement. Together, our Communications and Segment products power our customer engagement platform. Our goal is to create a flywheel for effective customer engagement by combining Segment’s user profiles with our rich Communications data to drive more personalized and intelligent customer interactions.

Previous wording

In the three months ended June 30, 2024 and 2023, our revenue was $1.08 billion and $1.04 billion, respectively, and our net loss was $31.9 million and $166.2 million, respectively. In the three months ended June 30, 2024 and 2023, our 10 largest Active Customer Accounts generated an aggregate of 10% and 11% of our total revenue, respectively.

Current wording

In the three months ended September 30, 2024 and 2023, our revenue was $1.13 billion and $1.03 billion, respectively, and our net loss was $9.7 million and $141.7 million, respectively. In both the three months ended September 30, 2024 and 2023, our 10 largest Active Customer Accounts generated an aggregate of 10% of our total quarterly revenue.

Previous wording

We are also migrating part of Segment’s architecture to a new infrastructure provider in 2024, which we expect will allow us to recognize greater operational efficiency and scale up new AI-driven products and features. We expect this migration will take several quarters and result in overlapping expenses with our original and new vendors for much of 2024, which we expect to negatively impact Segment gross margins until we complete the migration. We expect to complete the migration by the end of 2024.

Current wording

We are migrating part of Segment’s architecture to a new infrastructure provider, which we expect will allow us to recognize greater operational efficiency and scale up new AI-driven products and features. This migration will result in overlapping expenses with our original and new vendors for the fourth quarter of 2024, which we expect to negatively impact Segment gross margins in such quarter. We expect to complete the migration by the end of 2024.

Previous wording

We are winding down the software component of our Zipwhip business in 2024, which we expect will negatively impact revenue growth rates in 2024.

Current wording

We also expect that the wind-down of the software component of our Zipwhip business will negatively impact our revenue growth rates in the fourth quarter of 2024.

Previous wording

We expect our prior workforce restructurings to reduce our operating expenses in future periods. We also expect that the new cash bonus program that we introduced in 2024 to reduce or eliminate our use of equity compensation for certain employees will continue to increase our expenses in future periods.

Current wording

We expect our prior workforce restructurings to reduce our operating expenses in future periods. We also expect the new cash bonus program as described above to continue to increase our expenses in future periods.

Previous wording

In February 2023, one of our customers, Oi SA, a Brazilian telecom company, initiated reorganization proceedings in a Brazilian bankruptcy court and exposed us to risks on collections of pre-petition receivables and ongoing revenue. In April 2024, the creditors of Oi SA approved a Judicial Reorganization Plan (the “Oi Reorganization Plan”) that aims to ensure Oi SA’s operational feasibility and continuity of activities and further provides extended and discounted payment terms for pre-petition receivables. The Oi Reorganization Plan was subsequently ratified by the Brazilian bankruptcy court and contains contingencies including but not limited to Oi SA’s completion of financing by July 16, 2024, which was subsequently extended to August 8, 2024. As of June 30, 2024, we have $6.4 million in pre-petition accounts receivable (net of $8.8 million in reserves) and $13.1 million in post-petition accounts receivable due from Oi SA. The customer has been making regular payments on post-petition receivables. If Oi SA fails to comply with its obligations under the Oi Reorganization Plan, if the contingencies contained in the Oi Reorganization Plan are not timely resolved, or if the customer ceases to make payment on post-petition receivables, we may incur additional bad debt expense or reductions in revenue in future periods.

Current wording

In February 2023, one of our customers, Oi SA, a Brazilian telecom company, initiated reorganization proceedings in a Brazilian bankruptcy court and exposed us to risks on collections of pre-petition receivables and ongoing revenue. In April 2024, the creditors of Oi SA approved a Judicial Reorganization Plan (the “Oi Reorganization Plan”) that aims to ensure Oi SA’s operational feasibility and continuity of activities and further provides extended and discounted payment terms for pre-petition receivables. The Oi Reorganization Plan was subsequently ratified by the Brazilian bankruptcy court and contains various contingencies. As of September 30, 2024, we have $6.4 million in pre-petition receivables recorded in other long-term assets (net of $8.8 million in reserves) and $10.8 million in post-petition accounts receivable due from Oi SA. The customer has been making regular payments on post-petition receivables. If Oi SA fails to comply with its obligations under the Oi Reorganization Plan, if the contingencies contained in the Oi Reorganization Plan are not timely resolved, or if the customer ceases to make payment on post-petition receivables, we may incur additional bad debt expense or reductions in revenue in future periods.

Previous wording

Most of our usage-based customers gain access to our products and solutions through our e-commerce self-service sign-up format, which requires an upfront prepayment via credit card that is drawn down as they use our products. Pricing is generally based on a publicly available, self-serve pricing matrix that generally allows customers to receive tiered discounts as their usage of our products increases. Many of our larger usage-based customers enter into contractual arrangements with us for a period of at least 12 months. These contracts may include negotiated terms and typically include minimum revenue commitments of varying durations. Usage-based customers subject to such contracts are typically invoiced monthly in arrears for products used. In each of the three months ended June 30, 2024 and 2023, we generated 71% of our revenue from usage-based fees.

Current wording

Most of our usage-based customers gain access to our products and solutions through our e-commerce self-service sign-up format, which requires an upfront prepayment via credit card that is drawn down as they use our products. Pricing is generally based on a publicly available, self-serve pricing matrix that generally allows customers to receive tiered discounts as their usage of our products increases. Many of our larger usage-based customers enter into contractual arrangements with us for a period of at least 12 months. These contracts may include negotiated terms and typically include minimum revenue commitments of varying durations. Usage-based customers subject to such contracts are typically invoiced monthly in arrears for the products used. In the three months ended September 30, 2024 and 2023, we generated 72% and 71% of our revenue, respectively, from usage-based fees.

Previous wording

Subscription-based fees are earned in accordance with subscription pricing terms. For our subscription-based products, customers generally enter into negotiated contracts, which are typically one to three years in duration. Subscription customers are generally invoiced in advance at the start of the contract term. In each of the three months ended June 30, 2024 and 2023, we generated 29% of our revenue from non-usage‑based fees.

Current wording

Subscription-based fees are earned in accordance with subscription pricing terms. For our subscription-based products, customers generally enter into negotiated contracts, which are typically one to three years in duration. Subscription customers are generally invoiced in advance at the start of the contract term. In the three months ended September 30, 2024 and 2023, we generated 28% and 29% of our revenue, respectively, from non-usage‑based fees.

Previous wording

The most significant components of operating expenses are personnel costs, which consist of salaries, benefits, sales commissions and bonuses and stock‑based compensation. We also incur other non‑personnel costs related to our general overhead expenses.

Current wording

The most significant components of operating expenses are personnel costs, which consist of salaries, benefits, sales commissions, bonuses and stock‑based compensation. We also incur other non‑personnel costs related to our general overhead expenses.

Previous wording

Research and Development. Research and development expenses consist primarily of personnel costs, outsourced engineering services, cloud infrastructure fees for staging and development of our products, depreciation, amortization of capitalized internal-use software development costs and an allocation of our general overhead expenses. We capitalize the portion of our 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. A small percentage of research and development costs, such as costs related to digital architecture and information security, are not allocated to segments because they support company-wide processes and are managed on a company-wide level.

Current wording

Research and Development. Research and development expenses consist primarily of personnel costs, outsourced engineering services, cloud infrastructure fees for staging and development of our products, depreciation, amortization of capitalized internal-use software development costs and an allocation of our general overhead expenses. We capitalize the portion of our 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 consumption of these costs. A small percentage of research and development costs, such as costs related to digital architecture and information security, are not allocated to segments because they support company-wide processes and are managed on a company-wide level.

Previous wording

Our other 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 and marketable securities, including interest income; and debt-related costs, including interest expense.

Current wording

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 and marketable securities, including interest income; and debt-related costs, including interest expense.

Previous wording

In the three months ended June 30, 2024, Communications revenue increased by $42.8 million, or 4%, compared to the same period last year. This increase was primarily attributable to the increased usage of our products by our existing customers, as reflected in our Communications Dollar‑Based Net Expansion Rate of 102%, as well as $48.6 million in revenue derived from our new Communications Active Customer Accounts. These increases were partially offset by a decrease of $24.8 million related to revenue from our Internet of Things and ValueFirst businesses which we divested during the second and third quarters of 2023, respectively.

Current wording

In the three months ended September 30, 2024, Communications revenue increased by $100.0 million, or 10%, compared to the same period last year. This increase was primarily attributable to the increased usage of our products by our existing customers, as reflected in our Communications Dollar‑Based Net Expansion Rate of 106%, as well as $51.1 million in revenue derived from our new Communications Active Customer Accounts.

Previous wording

In the three months ended June 30, 2024, Segment revenue increased by $2.0 million, or 3%, compared to the same period last year. This change was primarily attributable to $8.1 million in revenue derived from our new Segment Active Customer Accounts, partially offset by the decreased usage of our products due to churn and contraction affecting our existing customers in 2023, as reflected in our Segment Dollar‑Based Net Expansion Rate of 93%.

Current wording

In the three months ended September 30, 2024, Segment revenue remained unchanged compared to the same period last year. We recognized $6.9 million in revenue derived from our new Segment Active Customer Accounts, offset by the decreased usage of our products due to churn and contraction affecting our existing customers, as reflected in our Segment Dollar‑Based Net Expansion Rate of 91%.

Previous wording

In the three months ended June 30, 2024, gross profit increased by $50.1 million, or 10%, compared to the same period last year. This increase was attributable to the factors impacting our revenue and cost of revenue, as described above.

Current wording

In the three months ended September 30, 2024, gross profit increased by $62.3 million, or 12%, compared to the same period last year. This increase was attributable to the factors impacting our revenue and cost of revenue, as described above.

Previous wording

In the three months ended June 30, 2024, research and development expenses increased by $16.8 million, or 7%, compared to the same period last year. The increase was primarily attributable to a $17.3 million increase in total personnel costs, which was primarily driven by a $13.9 million increase in bonus expenses as a result of the introduction of our new cash bonus program, and a $7.4 million increase in stock-based compensation expense. These increases were partially offset by a $5.1 million decrease in salaries expense due to a 14% decrease in average research and development headcount compared to the same period last year.

Current wording

In the three months ended September 30, 2024, research and development expenses increased by $19.2 million, or 8%, compared to the same period last year. The increase was primarily attributable to a $14.6 million increase in total personnel costs, net of capitalized costs, despite a 6% decrease in average research and development headcount compared to the same period last year. The increase in personnel costs was primarily driven by a $27.2 million increase in bonus expenses as a result of the introduction of our new cash bonus program, partially offset by a $5.3 million increase in capitalized costs and an $8.0 million decrease in stock-based compensation expense. The increase in research and development expenses was also attributable to a $4.6 million increase in hosting fees to support development and staging of our products.

Previous wording

In the three months ended June 30, 2024, sales and marketing expenses decreased by $44.0 million, or 17%, compared to the same period last year. The decrease was primarily attributable to a $25.1 million decrease in total personnel costs, which was primarily driven by a 19% decrease in average sales and marketing headcount compared to the same period last year. The decrease in headcount was primarily due to the restructuring of our workforce in December 2023. Sales and marketing expenses also decreased due to an $8.1 million decrease in amortization of intangible assets and a $5.1 million decrease in expenses related to corporate events.

Current wording

In the three months ended September 30, 2024, sales and marketing expenses decreased by $50.3 million, or 19%, compared to the same period last year. The decrease was primarily attributable to a $20.6 million decrease in total personnel costs, which was primarily driven by a 16% decrease in average sales and marketing headcount compared to the same period last year. The decrease in headcount was primarily due to the restructuring of our workforce in December 2023. Sales and marketing expenses also decreased due to an $8.1 million decrease in advertising expenses, a $7.7 million decrease in amortization of intangible assets and a $6.7 million decrease in expenses related to corporate events.

Previous wording

In the three months ended June 30, 2024, impairment of long-lived assets decreased by $9.3 million, or 100%, compared to the same period last year. The prior year charges were related to the impairment of certain of our operating leases and other long-lived assets as a result of permanent office closures in 2023. There were no such impairments in the current period.

Current wording

In the three months ended September 30, 2024, impairment of long-lived assets decreased by $3.2 million, or 100%, compared to the same period last year. The prior year charges were related to the impairment of certain of our operating leases and other long-lived assets as a result of permanent office closures in 2023. There were no such impairments in the current period.

Previous wording

In the three months ended June 30, 2024, other expenses, net, decreased by $16.4 million, or 69%, compared to the same period last year. The decrease was primarily attributable to an $8.4 million decrease in our share of losses from our equity method investment and an $8.7 million increase in other income, net, primarily related to the income earned on our debt securities in the current period. These increases were partially offset by unrealized losses related to fluctuations in foreign currency exchange rates.

Current wording

In the three months ended September 30, 2024, other (income) expenses, net, increased by $32.3 million, or 104%, compared to the same period last year. The decrease was primarily attributable to a $27.3 million increase in other income, net, primarily related to the income earned on our securities in the current period and unrealized gains related to fluctuations in foreign currency exchange rates, and a $5.8 million decrease in our share of losses from our equity method investment.

Previous wording

In the three months ended June 30, 2024, Communications non-GAAP income from operations increased by $57.4 million, or 30%, compared to the same period last year. The increase was primarily driven by an increase in Communications revenue of $42.8 million, as described in the Revenue section above, a $10.1 million decrease in total Communications personnel costs as a result of a 17% decrease in average Communications headcount compared to the same period last year, a $6.8 million decrease in the provision for doubtful accounts and a $4.8 million decrease in network service providers’ costs, net of the impact of hedging instruments, partially offset by an $11.2 million increase in hosting fees.

Current wording

In the three months ended September 30, 2024, Communications non-GAAP income from operations increased by $47.2 million, or 21%, compared to the same period last year. The increase was primarily driven by an increase in Communications revenue of $100.0 million, as described in the Revenue section above, and a $15.6 million decrease in the provision for doubtful accounts. This increase was partially offset by a $43.9 million increase in network service providers’ costs, net of the impact of hedging instruments, and a $22.5 million increase in total Communications personnel costs, despite a 9% decrease in average Communications headcount during the period. The $22.5 million increase in total Communications personnel costs was primarily driven by a $26.8 million increase in bonus expenses as a result of the introduction of our new cash bonus program.

Previous wording

In the six months ended June 30, 2024, Segment non-GAAP loss from operations increased by $0.6 million, or 2%, compared to the same period last year. The increase was driven by an increase in hosting fees of $3.9 million, partially offset by a decrease in Segment operating expenses of $1.8 million and an increase in Segment revenue of $3.4 million, as described in the Revenue section above.

Current wording

In the three months ended September 30, 2024, Segment non-GAAP loss from operations decreased by $1.9 million, or 11%, compared to the same period last year. The decrease was driven by a decrease in Segment operating expenses of $5.8 million, partially offset by an increase in hosting fees of $3.0 million.

Previous wording

In the six months ended June 30, 2024, Communications revenue increased by $81.8 million, or 4%, compared to the same period last year. This increase was primarily attributable to the increased usage of our products by our existing customers, as reflected in our Communications Dollar‑Based Net Expansion Rate of 103%, as well as $97.5 million in revenue derived from our new Communications Active Customer Accounts and new customer accounts from Zipwhip. These increases were partially offset by a decrease of $52.8 million related to revenue from our Internet of Things and ValueFirst businesses which we divested during the second and third quarters of 2023, respectively.

Current wording

In the nine months ended September 30, 2024, Communications revenue increased by $181.8 million, or 6%, compared to the same period last year. This increase was primarily attributable to the increased usage of our products by our existing customers, as reflected in our Communications Dollar‑Based Net Expansion Rate of 104%, as well as $148.6 million in revenue derived from our new Communications Active Customer Accounts and new customer accounts from Zipwhip. These increases were partially offset by a decrease of $52.8 million related to revenue from our Internet of Things and ValueFirst businesses which we divested during the second and third quarters of 2023, respectively.

Previous wording

In the six months ended June 30, 2024, Segment revenue increased by $3.4 million, or 2%, compared to the same period last year. This change was primarily attributable to $16.6 million in revenue derived from our new Segment Active Customer Accounts, partially offset by the decreased usage of our products due to churn and contraction affecting our existing customers in 2023, as reflected in our Segment Dollar‑Based Net Expansion Rate of 92%.

Current wording

In the nine months ended September 30, 2024, Segment revenue increased by $3.4 million, or 2%, compared to the same period last year. This change was primarily attributable to $23.5 million in revenue derived from our new Segment Active Customer Accounts, partially offset by the decreased usage of our products due to churn and contraction affecting our existing customers, as reflected in our Segment Dollar‑Based Net Expansion Rate of 92%.

Previous wording

In the three months ended June 30, 2024, cost of revenue decreased by $5.3 million, or 1%, compared to the same period last year. The decrease was primarily attributable to a $14.0 million decrease in amortization of intangible assets and a $4.8 million decrease in network service providers’ costs, net of the impact of hedging instruments. These decreases were partially offset by a $14.4 million increase in hosting fees.

Current wording

In the nine months ended September 30, 2024, cost of revenue increased by $19.5 million, or 1%, compared to the same period last year. The increase was primarily attributable to a $30.2 million increase in network service providers’ costs, net of the impact of hedging instruments, and a $30.0 million increase in hosting fees. These increases were partially offset by a $41.6 million decrease in amortization of intangible assets.

Previous wording

In the six months ended June 30, 2024, gross profit increased by $103.4 million, or 10%, compared to the same period last year. This increase was attributable to the factors impacting our revenue and cost of revenue, as described above.

Current wording

In the nine months ended September 30, 2024, gross profit increased by $165.8 million, or 11%, compared to the same period last year. This increase was attributable to the factors impacting our revenue and cost of revenue, as described above.

Previous wording

In the six months ended June 30, 2024, research and development expenses increased by $29.8 million, or 6%, compared to the same period last year. The increase was primarily attributable to a $23.7 million increase in total personnel costs, which was primarily driven by a $28.4 million increase in bonus expenses as a result of our new cash bonus program and an $11.2 million increase in stock-based compensation expense. These increases were partially offset by a $19.6 million decrease in salaries expense due to a 21% decrease in average research and development headcount compared to the same period last year as a result of the restructuring of our workforce in February 2023 and December 2023. The increase in research and development expenses was also attributable to a $6.2 million increase in hosting fees to support development and staging of our products.

Current wording

In the nine months ended September 30, 2024, research and development expenses increased by $49.0 million, or 7%, compared to the same period last year. The increase was primarily attributable to a $30.7 million increase in total personnel costs, net of capitalized costs, which was primarily driven by a $55.6 million increase in bonus expenses as a result of our new cash bonus program, partially offset by a $20.3 million decrease in salaries expense due to a 17% decrease in average research and development headcount compared to the same period last year as a result of the restructuring of our workforce in February 2023 and December 2023. The increase in research and development expenses was also attributable to a $10.7 million increase in hosting fees to support development and staging of our products and an $8.8 million increase in software subscription expenses.

Previous wording

In the six months ended June 30, 2024, sales and marketing expenses decreased by $89.9 million, or 17%, compared to the same period last year. The decrease was primarily attributable to a $59.0 million decrease in total personnel costs, which was primarily driven by a 23% decrease in average sales and marketing headcount compared to the same period last year. The decrease in headcount was primarily driven by the restructuring of our workforce in February 2023 and December 2023. Sales and marketing expenses also decreased due to a $16.4 million decrease in amortization of intangible assets and a $5.3 million decrease in advertising expenses.

Current wording

In the nine months ended September 30, 2024, sales and marketing expenses decreased by $140.2 million, or 18%, compared to the same period last year. The decrease was primarily attributable to a $79.4 million decrease in total personnel costs, which was primarily driven by a 21% decrease in average sales and marketing headcount compared to the same period last year. The decrease in headcount was primarily driven by the restructuring of our workforce in February 2023 and December 2023. Sales and marketing expenses also decreased due to a $24.0 million decrease in amortization of intangible assets, a $13.4 million decrease in advertising expenses and an $8.5 million decrease in expenses related to corporate events.

Previous wording

In the six months ended June 30, 2024, general and administrative expenses decreased by $21.5 million, or 9%, compared to the same period last year. The decrease was primarily attributable to the $32.3 million loss on divested net assets recorded in the 2023 period related to the sale of our ValueFirst and Internet of Things businesses. This decrease was partially offset by a $14.0 million increase in charitable contributions that we made through Twilio.org during the first half of 2024.

Current wording

In the nine months ended September 30, 2024, general and administrative expenses decreased by $29.2 million, or 8%, compared to the same period last year. The decrease was primarily attributable to the $32.3 million loss on divested net assets recorded in the 2023 period related to the sale of our ValueFirst and Internet of Things businesses and a $22.7 million decrease in the provision for doubtful accounts. The decrease in general and administrative expenses was partially offset by a $14.0 million increase in professional services fees and a $13.9 million increase in charitable contributions that we made through Twilio.org during the first nine months of 2024.

Previous wording

In the three months ended June 30, 2024, restructuring costs decreased by $15.2 million, or 102%, compared to the same period last year. The decrease was primarily attributable to the significant restructuring costs incurred in the 2023 period related to our February 2023 restructuring activities.

Current wording

In the nine months ended September 30, 2024, restructuring costs decreased by $127.0 million, or 90%, compared to the same period last year. The decrease was primarily attributable to the significant restructuring costs incurred in the 2023 period related to our February 2023 restructuring activities.

Previous wording

In the six months ended June 30, 2024, impairment of long-lived assets decreased by $31.1 million, or 100%, compared to the same period last year. The prior year charges were related to the impairment of certain of our operating leases and other long-lived assets as a result of permanent office closures in the first half of 2023. There were no such impairments in the current period.

Current wording

In the nine months ended September 30, 2024, impairment of long-lived assets decreased by $34.3 million, or 100%, compared to the same period last year. The prior year charges were related to the impairment of certain of our operating leases and other long-lived assets as a result of permanent office closures in the first half of 2023. There were no such impairments in the current period.

Previous wording

In the six months ended June 30, 2024, other expenses, net, decreased by $82.3 million, or 90%, compared to the same period last year. The decrease was primarily attributable to a $46.2 million impairment of a strategic investment that occurred during the first half of 2023, a $27.6 million increase in other income, net, primarily related to an increase in income earned on our debt securities, and a $9.3 million decrease in our share of losses from our equity method investment.

Current wording

In the nine months ended September 30, 2024, other expenses, net, decreased by $114.6 million, or 94%, compared to the same period last year. The decrease was primarily attributable to a $46.2 million impairment of a strategic investment that occurred during the nine months ended September 30, 2023, a $54.9 million increase in other income, net, primarily related to an increase in income earned on our debt securities, and a $15.0 million decrease in our share of losses from our equity method investment.

Previous wording

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 six months ended June 30, 2024 and 2023:

Current wording

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 nine months ended September 30, 2024 and 2023:

Previous wording

In the six months ended June 30, 2024, Communications non-GAAP income from operations increased by $126.0 million, or 34%, compared to the same period last year. The increase was primarily driven by an increase in Communications revenue of $81.8 million, as described in the Revenue section above, and a $33.4 million decrease in total Communications personnel costs, which was mainly due to the restructuring of our workforce in February 2023 and December 2023. These restructurings contributed to a 25% decrease in average Communications headcount compared to the same period last year. The increase was also due to a $9.2 million decrease in the provision for doubtful accounts and a $13.7 million decrease in network service providers’ costs, net of the impact of hedging instruments, which was partially offset by a $17.1 million increase in hosting fees.

Current wording

In the nine months ended September 30, 2024, Communications non-GAAP income from operations increased by $173.1 million, or 29%, compared to the same period last year. The increase was primarily driven by an increase in Communications revenue of $181.8 million, as described in the Revenue section above, a $24.8 million decrease in the provision for doubtful accounts and a $10.9 million decrease in total Communications personnel costs, which was mainly due to the restructuring of our workforce in February 2023 and December 2023. These restructurings contributed to a 21% decrease in average Communications headcount compared to the same period last year. These drivers were partially offset by a $30.2 million increase in network service providers’ costs, net of the impact of hedging instruments, and a $23.1 million increase in hosting fees.

Previous wording

In the three months ended June 30, 2024, Segment non-GAAP loss from operations decreased by $3.2 million, or 17%, compared to the same period last year. The decrease was driven by a decrease in Segment operating expenses of $5.3 million and an increase in Segment revenue of $2.0 million, as described in the Revenue section above, partially offset by an increase in hosting fees of $3.2 million.

Current wording

In the nine months ended September 30, 2024, Segment non-GAAP loss from operations decreased by $1.3 million, or 2%, compared to the same period last year. The decrease was driven by a decrease in Segment operating expenses of $7.6 million and an increase in Segment revenue of $3.4 million, as described in the Revenue section above, partially offset by a $9.7 million increase in cost of revenue.

Previous wording

As of June 30, 2024, we had cash and cash equivalents of $755.1 million and short-term marketable securities of $2.4 billion. Cash equivalents consist of money market funds and commercial paper. 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. The cash and cash equivalents and short-term marketable securities are held for working capital purposes.

Current wording

As of September 30, 2024, we had cash and cash equivalents of $584.0 million and short-term marketable securities of $2.1 billion. Cash equivalents consist of money market funds and commercial paper. 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. The cash and cash equivalents and short-term marketable securities are held for working capital purposes.

Previous wording

In February 2023, our board of directors authorized a share repurchase program pursuant to which we may repurchase up to $1.0 billion in aggregate value of our common stock. In March 2024, our board of directors authorized a second share repurchase program for an additional $2.0 billion in aggregate value of our common stock. As of June 30, 2024, we have repurchased approximately $2.0 billion of our common stock in the open market under these programs, and approximately $1.0 billion of the aggregate authorized amount remained available for future repurchases. Repurchases under these programs will 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. We have discretion in determining the conditions under which shares may be repurchased from time to time. The programs expire on December 31, 2024.

Current wording

In February 2023, our board of directors authorized a share repurchase program pursuant to which we may repurchase up to $1.0 billion in aggregate value of our common stock. In March 2024, our board of directors authorized a second share repurchase program for an additional $2.0 billion in aggregate value of our common stock. As of September 30, 2024, we have repurchased approximately $2.6 billion of our common stock in the open market under these programs, and approximately $412.0 million of the aggregate authorized amount remained available for future repurchases. Repurchases under these programs will 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. We have discretion in determining the conditions under which shares may be repurchased from time to time. The programs expire on December 31, 2024.

Previous wording

In the three and six months ended June 30, 2024, we repurchased $898.6 million in aggregate value, or 15.2 million shares, and $1.3 billion in aggregate value, or 21.4 million shares, respectively, of our common stock on the open market under these programs.

Current wording

In the three and nine months ended September 30, 2024, we repurchased $633.0 million in aggregate value, or 10.6 million shares, and $1.9 billion in aggregate value, or 32.0 million shares, respectively, of our common stock on the open market under these programs.

Previous wording

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.

Current wording

In the nine months ended September 30, 2024, cash provided by operating activities consisted primarily of our net loss of $96.9 million adjusted for non-cash items, including $460.8 million of stock-based compensation expense, $156.2 million of depreciation and amortization expense, $57.0 million amortization of deferred commissions, $78.8 million of share of losses from equity method investments and $74.0 million of cumulative changes in operating assets and liabilities. With respect to changes in operating assets and liabilities, accounts receivable and prepaid expenses decreased $20.9 million primarily due to timing of cash receipts and pre-payments of certain operating expenses. Accounts payable and other current liabilities decreased $33.2 million, primarily driven by timing of payments to vendors. Operating lease liabilities decreased $35.4 million due to payments made against our operating lease obligations.

Previous wording

In the six months ended June 30, 2023, cash used in operating activities consisted primarily of our net loss of $508.3 million adjusted for non-cash items, including $323.9 million of stock-based compensation expense which included the impact of our February 2023 restructuring activities, $146.4 million of depreciation and amortization expense, $62.8 million of our share of losses from an equity method investment, $46.2 million of impairment of an investment that we acquired in 2021, $36.1 million amortization of deferred commissions, $31.1 million of impairment of operating lease assets and other long-lived assets, $32.3 million loss on net assets held for sale or divested, $16.1 million of non-cash reduction in our operating right-of-use asset, and $241.2 million of cumulative changes in operating assets and liabilities. With respect to changes in operating assets and liabilities, accounts receivable and prepaid expenses increased $137.2 million primarily due to revenue growth, timing of cash receipts and prepayments and certain operating expenses. Accounts payable and other current liabilities decreased $57.9 million primarily driven by an $18.1 million decrease in the sabbatical benefit accrual as a result of lower headcount and sunsetting of the program. Operating lease liabilities decreased $27.9 million due to payments made against our operating lease obligations. Other long-term assets increased $19.2 million primarily due to an increase in the sales commissions balances related to the growth of our business.

Current wording

In the nine months ended September 30, 2023, cash provided by operating activities consisted primarily of our net loss of $650.0 million adjusted for non-cash items, including $509.4 million of stock-based compensation expense which included the impact of our February 2023 restructuring activities, $219.0 million of depreciation and amortization expense, $93.8 million of our share of losses from an equity method investment, $54.4 million of amortization of deferred commissions, $46.2 million of impairment of an investment that we acquired in 2021, $34.3 million of impairment of operating lease assets and other long-lived assets, $32.3 million loss on net assets divested, $21.8 million of non-cash reduction in our operating right-of-use asset, and $240.3 million of cumulative changes in operating assets and liabilities. With respect to changes in operating assets and liabilities, accounts receivable and prepaid expenses increased $125.6 million primarily due to revenue growth, timing of cash receipts and prepayments and certain operating expenses. Accounts payable and other current liabilities decreased $62.3 million, primarily driven by a $22.3 million decrease in the sabbatical benefit accrual as a result of lower headcount and sunsetting of the program and a decrease in personnel-related accruals due to lower headcount. Operating lease liabilities decreased $41.4 million due to payments made against our operating lease obligations. Other long-term assets increased $15.4 million primarily due to an increase in the sales commissions balances related to the growth of our business.

Previous wording

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.

Current wording

In the nine months ended September 30, 2024, cash provided by investing activities was $1.2 billion, primarily consisting of $1.3 billion of maturities and sales of marketable securities, net of purchases, partially offset by $40.3 million related to capitalized software development costs and $3.5 million related to purchases of long-lived assets.

Previous wording

In the six months ended June 30, 2023, cash provided by investing activities was $509.8 million primarily consisting of $538.3 million of proceeds from sales and maturities of marketable securities, net of purchases of marketable securities and other investments; $20.1 million related to capitalized software development costs and $8.3 million related to purchases of long-lived assets.

Current wording

In the nine months ended September 30, 2023, cash provided by investing activities was $365.7 million primarily consisting of $372.9 million of proceeds from sales and maturities of marketable securities, net of purchases of marketable securities and other investments, and $38.2 million of proceeds from divestitures, net of cash divested, partially offset by $30.5 million related to capitalized software development costs and $9.0 million related to purchases of long-lived assets.