Twilio (TWLO) Financial History

•fluctuations in the levels of our customers’ usage of our platform;

•our reliance on network service providers and internet service providers for network service and connectivity;

Macroeconomic and political conditions and uncertainties have in the past adversely affected, and may in the future adversely affect, our business, results of operations and financial condition, and could exacerbate m…

other risks described in this “Risk Factors” section, some of the factors that may result in fluctuations to our results of operations include:

•seasonal trends, including due to increased consumer activity in the fourth quarter;

motions.

Our sales and marketing strategies, and their effectiveness, are influenced by numerous factors.

Reliance on these providers poses risks to the quality of our services, primarily by limiting our control, operating flexibility, and ability to timely identify and respond to necessary service changes, and by subject…

The fees we pay to these providers also subject us to risks.

We also face risks related to losing access to these services.

Any of the foregoing consequences of our reliance on network service providers, intermediaries and internet service providers to deliver our products could adversely impact our business, results of operations and fina…

We periodically adjust the pricing for our products and expect to continue to.

region or otherwise have a material impact on regional or global economies, any or all of which could adversely affect our business.

We depend upon our IT systems to conduct virtually all of our business operations, ranging from our internal operations and research and development activities to our marketing and sales efforts and communications wit…

We have been targeted by threat actors seeking unauthorized access to our systems or data, or that of our customers or third-party service providers, or to disrupt our operations or ability to provide our services.

•fraud, social-engineering attacks (such as phishing) and other third-party attempts to induce our employees, customers or partners to disclose sensitive information to gain access to our customers’ data or systems, o…

•efforts by hackers or sophisticated groups, such as criminal organizations, state-sponsored organizations or nation-states, to launch coordinated cyberattacks on internally built infrastructure or on third-party clou…

•third-party attempts to abuse our marketing, advertising, messaging or products and functionalities to impersonate persons or organizations and disseminate information that is false, misleading or malicious;

•attacks on, malfunctions or unavailability of, or other vulnerabilities in, the underlying networks and services that power the internet or that our products otherwise depend on, many of which are not under our contr…

•attacks facilitated or enhanced by AI, including deep fakes; and

•employee fraud, misconduct or error, including resulting from efforts to bribe, extort, infiltrate or otherwise compromise our or our service providers’ workforce.

Cyberattacks and other malicious activity continue to become more sophisticated, targeted and inexpensive to conduct, and to increase in frequency and magnitude.

We make, and expect to continue to make, significant investments in processes and controls designed to mitigate risks associated with breaches and other incidents, including to evaluate and respond to known and potent…

•the rapidly evolving nature of techniques to breach, compromise, or disrupt IT systems and infrastructure, including increasing use of AI technologies, such that we may not be able to recognize such techniques until…

•the increasing complexity of our internal IT systems, including as we adopt new technologies, including AI solutions, and incorporate and secure IT environments from acquired companies;

•our reliance on third-party technology and service providers; and

•our limited control over customers and third-party providers (including those authorized by customers to access their data) and the processing of data by third-party providers, which may prevent us from maintaining t…

In the normal course of business, we experience, and have experienced, cyberattacks and other security incidents, which have in the past and may in the future cause harm to our business.

We are subject to increasing legal, regulatory, and contractual obligations relating to privacy, data protection and cybersecurity that affect how we process personal data in the jurisdictions where we and our custome…

In the United States, for example, the California Consumer Privacy Act (as amended by the California Privacy Rights Act of 2020, the “CCPA”) provides our customers, employees, and other individuals certain rights rela…

We must also comply with increasing laws and regulations relating to data residency, data localization, and the transfer of data across territorial boundaries, arising from the fact that our primary data processing fa…

example, the GDPR restricts the transfer of personal data from the EU to the United States and other countries that are not deemed to have implemented adequate data protection measures, and other jurisdictions have pr…

Additionally, as a provider of interconnected VoIP service, we must also comply with certain U.S.

Taken together, evolving legal, regulatory and contractual obligations pertaining to privacy, data protection, cybersecurity and AI may require us to expend resources to modify our practices and products, reduce deman…

We also rely, in part, on contractual confidentiality obligations we impose on our business partners, employees, consultants, advisors, customers and others in our efforts to protect our proprietary technology, proces…

or that of AWS, is compromised, if our products, platform or customer data become unavailable, or if our users are unable to use our products within a reasonable amount of time or at all, any one of which may be due t…

We have deployed, and continue to develop and incorporate, AI solutions and features in our platform and our business, and these solutions and features may become more important to our operations, future growth or com…

As a provider of communications products and a licensed telecommunications provider, we are required to comply with many changing federal, state and international regulations, including relating to privacy, security,…

In the United States, at the federal level, we and/or our customers are required to comply with laws and regulations limiting telemarketing and certain technologies that enable automatic calling and/or messaging and e…

We are also subject to varying international licensing obligations and communications regulations, including related to reporting requirements, provision of emergency services and of information to support emergency s…

provide services may not comply with applicable governmental regulations, subjecting us to potential penalties or governmental actions that may be costly, harm our business and damage our brand and reputation.

Both in the United States and internationally, these requirements continue to change.

If we are unable to acquire or retain Numbering Resources, our voice and messaging products may be less attractive to potential customers.

The Federal Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 (the “CAN-SPAM Act”) establishes certain requirements for commercial email messages and transactional email messages and speci…

The actual or perceived improper sending of text messages, voice calls, or e-mail may subject us to potential risks, including liabilities or claims relating to consumer protection laws and regulatory enforcement, inc…

Moreover, certain customers and others have in the past, and despite our prevention efforts, may in the future, use our platform to transmit unwanted, offensive or illegal communications, spam, social engineering scam…

Our customers’ and other users’ promotion of their products and services through our platform might not comply with federal, state, and foreign laws or of contractual requirements imposed by carriers, such as the CTIA…

which may be imposed on us and responsible employees or managers; criminal liability, which may be imposed on us and responsible employees or managers; and, in extreme cases, the incarceration of responsible employees…

Additionally, inbox service providers can block emails from reaching their users or categorize certain emails as “promotional” emails and, as a result, direct them to an alternate or “tabbed” section of the recipient’…

We rely on assumptions and estimates to calculate certain of our business metrics that we disclose in SEC filings, press releases and other materials, including Active Customer Accounts and Dollar-Based Net Expansion…

Events or changes in circumstances may require us to record impairment charges related to our intangible assets, goodwill or investments.

over financial reporting, such that there is a reasonable possibility that a material misstatement of our financial statements will not be prevented or detected on a timely basis.

In many of the jurisdictions in which we operate, non-income-based taxes, such as sales tax, value-added tax, goods and services tax, and telecommunications taxes, are assessed on our operations or our sales to custom…

We are in discussions with certain jurisdictions regarding potential sales and other indirect taxes for prior periods that we may owe.

Changes in tax laws, including recently enacted U.S.

As another example, the Organization for Economic Co-operation and Development (the “OECD”) has proposed a global minimum tax (“Pillar Two”), contemplating a minimum tax rate of 15% for large multinational companies,…

activities, lengthy interruptions in service, security breaches and incidents and loss or unavailability of critical data, any of which could adversely affect our business, results of operations and financial condition.

•our ability to increase our customers’ usage of our platform;

•our ability to increase adoption of our products by new customers, including enterprises;

•the evolution of the markets for our products;

•disruptions or deterioration in quality of service and connectivity by third-party service providers;

to-market motions.

In addition, in recent years, we have reduced the size of our sales force to drive further efficiencies in our sales operations.

If we are unable to increase adoption of our products by new customers, including enterprises, our business, results of operations and financial condition may be adversely affected.

Historically, a majority of our Active Customer Accounts have been acquired through the adoption of our Communications API products by software developers using our self-service model.

As our platform and market evolves and we seek to increase our customer base and achieve broader market acceptance of our products, we must effectively adapt our sales motions and navigate challenges presented by thes…

Our ability to expand our customer base, including among enterprises, and to succeed in evolving markets will also depend, in part, on our ability to effectively attract and retain sales employees with relevant experi…

The current and prospective markets for our products are subject to rapid technological change, evolving industry standards, and changing regulations, as well as changing customer needs, requirements and preferences.

evolving or new platforms and technologies could reduce the demand for our products.

If customers fail to pay us or reduce their spending with us as a result of adverse macroeconomic or geopolitical conditions or otherwise, we may be required to take steps to enforce the terms of our contracts and col…

•our ability to expand our customer base and the markets that our products address;

•the effectiveness of our sales and marketing efforts and the productivity of our sales force;

•seasonal trends in consumer activity;

•changes in the mix or amount of products sold in the United States versus internationally;

As part of our growth strategy, we have in the past reorganized, and may in the future reorganize, our business or change our reporting structure, which requires significant expenditures, allocation of valuable manage…

The markets for our products continue to evolve and may decline or experience limited growth.

The markets for our products continue to evolve, which makes our business and future prospects difficult to evaluate.

Any of our executive officers may terminate employment with us at any time with no advance notice.

For example, in recent years, multiple major U.S.

effect of increasing our revenue and cost of revenue, but typically does not impact the gross profit dollars received for sending these messages and, as a result, has a negative impact on our gross margins.

Furthermore, many of these network service providers do not have long-term committed contracts with us and may interrupt services or terminate their agreements with us without notice.

Further, we sometimes access network services through intermediaries who have direct access to network service providers.

We also interconnect with internet service providers around the world to enable the use of our email products by our customers, and we expect to continue to rely on internet service providers for network connectivity…

We adjust the pricing models for our products from time to time and expect that we will continue to do so.

We depend upon our IT systems to conduct virtually all of our business operations, ranging from our internal operations and research and development activities to our marketing and sales efforts and communications wit…

Individuals or entities have in the past attempted and will in the future attempt to penetrate the security of our platform, or of our network or systems, and to cause harm to our business operations, including by mis…

our service providers face from these and other types of attacks.

We depend upon our employees and contractors to appropriately handle confidential and sensitive data, including customer data, and to deploy our IT resources in a safe and secure manner that does not expose our networ…

We also rely on various third-party service providers to operate our platform and deliver our products, including network service providers, internet service providers, telecommunications carriers, providers of cloud…

Furthermore, we are required to comply with laws and regulations that require us to maintain security measures designed to protect personal information and we may have contractual and other legal obligations to notify…

While we maintain errors, omissions and cyber liability insurance policies covering certain security and privacy damages, we cannot be certain that our existing insurance coverage will continue to be available on acce…

available, and in sufficient amounts, to cover the potentially significant losses that may result from a security incident or breach or that the insurer will not deny coverage as to any future claim.

We and our customers are subject to numerous domestic (for example, the California Consumer Privacy Act (“CCPA”)) and foreign (for example, the General Data Protection Regulation (“GDPR”) in the European Union (“EU”))…

The CCPA (as amended by the California Privacy Rights Act of 2020) imposes obligations on businesses to which it applies.

Outside the United States, an increasing number of laws, regulations, and industry standards apply to privacy, data protection and cybersecurity.

Further, the interpretation and application of new domestic and foreign laws and regulations in many cases is uncertain, and our legal and regulatory obligations in such jurisdictions are subject to frequent and unexp…

Similarly, with our registration as an interconnected VoIP provider for certain products with the Federal Communications Commission (“FCC”), we also must comply with privacy laws associated with customer proprietary n…

Our actual or perceived failure to comply with laws, regulations, contractual commitments, or other actual or asserted obligations, including certain industry standards, regarding privacy, data protection and cybersec…

As a cumulative example of these risks, because our primary data processing facilities are in the United States, we have experienced hesitancy, reluctance, or refusal by European or multinational customers to continue…

Evolving laws, regulations, and other actual and asserted obligations relating to privacy, data protection, and cybersecurity, as well as any new or evolving obligations relating to the use of AI and ML technologies,…