Twilio(US:TWLO)2025-08-08 20:11PART I - FINANCIAL INFORMATION Financial Statements (unaudited) The unaudited condensed consolidated financial statements present Twilio's financial position as of June 30, 2025, and its results of operations and cash flows for the three and six months ended June 30, 2025 and 2024 Condensed Consolidated Balance Sheets As of June 30, 2025, Twilio's total assets were $9.85 billion, a slight decrease from $9.87 billion at the end of 2024, driven by a decrease in short-term marketable securities offset by an increase in cash and cash equivalents Condensed Consolidated Balance Sheet Highlights (in thousands) | Account | June 30, 2025 | December 31, 2024 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $969,229 | $421,297 | | Short-term marketable securities | $1,573,371 | $1,963,102 | | Total current assets | $3,531,637 | $3,447,299 | | Goodwill | $5,243,266 | $5,243,266 | | Total assets | $9,848,292 | $9,865,472 | | Liabilities & Equity | | | | Total current liabilities | $720,059 | $820,220 | | Long-term debt, net | $991,429 | $990,587 | | Total liabilities | $1,804,370 | $1,912,506 | | Total stockholders' equity | $8,043,922 | $7,952,966 | Condensed Consolidated Statements of Operations For Q2 2025, Twilio reported $1.23 billion revenue, a 13.5% increase year-over-year, achieving a net income of $22.4 million compared to a $31.9 million net loss in Q2 2024 Q2 2025 vs Q2 2024 Performance (in thousands, except per share data) | Metric | Q2 2025 | Q2 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | $1,228,425 | $1,082,502 | 13.5% | | Gross Profit | $602,740 | $555,845 | 8.4% | | Income (Loss) from Operations | $36,989 | $(19,037) | N/A | | Net Income (Loss) | $22,423 | $(31,858) | N/A | | Diluted EPS | $0.14 | $(0.19) | N/A | Six Months Ended June 30 Performance (in thousands, except per share data) | Metric | 2025 | 2024 | Change (%) | | :--- | :--- | :--- | :--- | | Revenue | $2,400,888 | $2,129,552 | 12.7% | | Gross Profit | $1,184,307 | $1,099,886 | 7.7% | | Income (Loss) from Operations | $60,071 | $(62,541) | N/A | | Net Income (Loss) | $42,440 | $(87,207) | N/A | | Diluted EPS | $0.26 | $(0.50) | N/A | Condensed Consolidated Statements of Cash Flows For the six months ended June 30, 2025, net cash provided by operating activities was $468.1 million, with cash, cash equivalents, and restricted cash increasing by $549.3 million Cash Flow Summary for Six Months Ended June 30 (in thousands) | Cash Flow Activity | 2025 | 2024 | | :--- | :--- | :--- | | Net cash provided by operating activities | $468,126 | $403,466 | | Net cash provided by investing activities | $382,879 | $974,384 | | Net cash used in financing activities | $(301,708) | $(1,261,022) | | Net increase in cash, cash equivalents and restricted cash | $549,297 | $116,828 | - Share repurchases were a primary use of cash in financing activities, totaling $323.2 million in the first six months of 2025, compared to $1.27 billion in the same period of 202430 Notes to Condensed Consolidated Financial Statements The notes provide detailed disclosure on accounting policies, segment reporting, financial instruments, and other key areas, including a $1.7 billion remaining share repurchase authorization - The company has two reportable segments: Twilio Communications and Twilio Segment. Communications generates the vast majority of revenue5657 Segment Revenue (Q2 2025 vs Q2 2024, in thousands) | Segment | Q2 2025 Revenue | Q2 2024 Revenue | Change (%) | | :--- | :--- | :--- | :--- | | Twilio Communications | $1,152,955 | $1,007,302 | 14.5% | | Twilio Segment | $75,470 | $75,200 | 0.4% | Segment Non-GAAP Income from Operations (Q2 2025 vs Q2 2024, in thousands) | Segment | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Twilio Communications | $280,613 | $249,930 | | Twilio Segment | $6,009 | $(15,815) | - In January 2025, the board authorized a new share repurchase program for up to $2.0 billion. As of June 30, 2025, approximately $1.7 billion remained available for future repurchases8586 Revenue by Geographic Area (in thousands) | Region | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | United States | $786,974 (64%) | $706,451 (65%) | | International | $441,451 (36%) | $376,051 (35%) | Management's Discussion and Analysis of Financial Condition and Results of Operations Management attributes the 13% year-over-year revenue growth in Q2 2025 primarily to increased usage from existing customers in the Communications segment, achieving profitability with a net income of $22.4 million Key Business Metrics Twilio's key business metrics showed positive momentum in Q2 2025, with Active Customer Accounts increasing to 349,000 and the Dollar-Based Net Expansion Rate improving to 108% Key Business Metrics Comparison | Metric | Q2 2025 | Q2 2024 | | :--- | :--- | :--- | | Active Customer Accounts | 349,000 | 316,000 | | Dollar-Based Net Expansion Rate | 108% | 102% | - Management believes the Active Customer Accounts metric is becoming less informative as an indicator of business growth due to a large number of accounts with low individual spend120 Results of Operations For Q2 2025, consolidated revenue grew 13% YoY to $1.23 billion, driven by a 14% increase in the Communications segment, leading to an operating income of $37.0 million Revenue by Segment - Q2 Comparison (in thousands) | Segment | Q2 2025 | Q2 2024 | Change | Change (%) | | :--- | :--- | :--- | :--- | :--- | | Twilio Communications | $1,152,955 | $1,007,302 | $145,653 | 14% | | Twilio Segment | $75,470 | $75,200 | $270 | 0% | | Total Revenue | $1,228,425 | $1,082,502 | $145,923 | 13% | - The Communications segment's revenue growth was driven by a 109% Dollar-Based Net Expansion Rate and $55.2 million in revenue from new customers152 - The Segment segment's flat revenue was due to new customer revenue being offset by churn and contraction from existing customers, reflected in a 95% Dollar-Based Net Expansion Rate153 - Cost of revenue increased 19% in Q2 2025, primarily due to a $94.5 million increase in network service provider costs155 - General and administrative expenses decreased by 11% in Q2 2025, mainly due to a $13.1 million decrease in charitable contributions159 Liquidity and Capital Resources As of June 30, 2025, Twilio had a strong liquidity position with $969.2 million in cash and cash equivalents and $1.6 billion in short-term marketable securities, with $306.9 million used for share repurchases - The company holds $969.2 million in cash and cash equivalents and $1.6 billion in short-term marketable securities as of June 30, 2025173 - A share repurchase program authorized in January 2025 allows for up to $2.0 billion in repurchases. In the first six months of 2025, $306.9 million was used to repurchase 3.0 million shares178179186 - Net cash from operating activities for the first six months of 2025 was $468.1 million, an increase from $403.5 million in the prior year period181182 Quantitative and Qualitative Disclosures About Market Risk Twilio is exposed to market risks, primarily interest rate risk and currency exchange risk, which are managed through hedging programs and not considered material - The company's primary market risks are interest rate risk and foreign currency exchange risk193 - Interest rate risk is considered immaterial due to the short-term nature of investments and fixed-rate debt193 - Foreign currency risk is managed through hedging programs, and a hypothetical 10% change in exchange rates is not expected to have a material impact196197 Controls and Procedures Management, including the CEO and CFO, evaluated the company's disclosure controls and procedures and concluded they were effective as of June 30, 2025, with no material changes to internal control over financial reporting - The CEO and CFO concluded that disclosure controls and procedures were effective as of June 30, 2025199 - No material changes to internal control over financial reporting occurred during the second quarter of 2025200 PART II - OTHER INFORMATION Legal Proceedings The company is subject to various legal actions and investigations in the ordinary course of business, which management believes will not have a material adverse effect - The company is subject to legal proceedings arising in the ordinary course of business but does not currently expect them to have a material adverse effect73203 Risk Factors The company identifies numerous risks that could adversely affect its business, including global economic conditions, intense competition, reliance on third-party providers, and cybersecurity threats Risks Related to Business and Industry Key business and industry risks include the adverse impact of global economic conditions on usage-based revenue, intense competition, and reliance on network service providers and AWS for core infrastructure - Global economic uncertainties can severely impact the business, as a majority of revenue is usage-based and sensitive to consumer spending211 - The market is intensely competitive, with competitors that are larger, have greater resources, and may offer lower prices234235 - The company relies heavily on network service providers for connectivity and on AWS for a substantial majority of its cloud infrastructure, making it vulnerable to service interruptions, fee increases, and policy changes from these third parties246289 Risks Related to Cybersecurity, Data Privacy and Intellectual Property The company faces significant risks from cybersecurity threats, complex and costly compliance with global data privacy laws, and new challenges introduced by the use of AI - The company is subject to evolving cybersecurity threats and has experienced incidents in the past, such as the social engineering attacks in 2022 that resulted in unauthorized access to some customer data262265 - Compliance with numerous and stringent data privacy laws like GDPR and CCPA is a significant challenge, with risks of large fines and business restrictions for non-compliance, particularly regarding international data transfers269271277 - The use of AI in products and business operations presents new risks, including potential for inaccurate or biased outputs, infringement of third-party rights, and navigating a rapidly evolving regulatory landscape291292 Risks Related to Legal and Regulatory Matters Twilio's products are subject to extensive and evolving telecommunications regulations in the U.S. and internationally, with risks of liability from platform misuse and challenges in obtaining numbering resources - The company is subject to significant telecommunications regulations from the FCC and international bodies, covering areas like robocall mitigation (TRACED Act), consumer protection (TCPA), and privacy294295296 - There is a risk of liability and reputational damage from customers misusing the platform for illegal activities such as spam, phishing, and TCPA violations, despite company policies309311 - Obtaining and retaining numbering resources (phone numbers, short codes) is critical but subject to complex and changing regulations in over 180 countries, which can lead to compliance challenges and service disruptions303304 Risks Related to Financial and Accounting Matters Financial risks include exposure to foreign currency fluctuations, constraints from $1.0 billion in outstanding debt, potential impairment of $5.4 billion in goodwill, and complex international tax liabilities - The company has $1.0 billion in outstanding debt, which may limit business flexibility and require significant cash flow for debt service332 - As of June 30, 2025, the company carried $5.4 billion of goodwill and intangible assets, which are subject to impairment risk if market conditions or business performance decline340 - The company faces potential additional tax liabilities from complex international operations, transfer pricing, and evolving tax laws like the OECD's Pillar Two framework347353356 Unregistered Sales of Equity Securities and Use of Proceeds During Q2 2025, Twilio issued 22,102 shares of Class A common stock for philanthropic goals and repurchased 1.81 million shares for approximately $97.62 per share - Issued 22,102 shares of Class A common stock valued at $2.2 million to a donor-advised fund for philanthropic purposes380 Share Repurchase Activity for Q2 2025 | Period | Total Shares Purchased (thousands) | Average Price Paid Per Share ($) | Approx. Value Remaining ($ millions) | | :--- | :--- | :--- | :--- | | April 2025 | 1,089 | $87.99 | $1,774 | | May 2025 | 469 | $108.66 | $1,723 | | June 2025 | 252 | $118.96 | $1,693 | | Total | 1,810 | - | $1,693 | Other Information On June 6, 2025, CFO Aidan Viggiano adopted a Rule 10b5-1 trading plan for the sale of shares tied to current and future RSU vestings - CFO Aidan Viggiano adopted a Rule 10b5-1 trading plan on June 6, 2025, for the sale of shares tied to current and future RSU vestings, effective until July 2026382 Exhibits This section lists the exhibits filed with the Quarterly Report on Form 10-Q, including the Amended and Restated Certificate of Incorporation and CEO/CFO certifications - Filed exhibits include the company's certificate of incorporation, CEO/CFO certifications (SOX 302 & 906), and XBRL data files386