Financial Data and Key Metrics Changes - In Q1 2026, total revenue reached $181.4 million, near the high end of guidance, reflecting strong execution across the business [33] - Service revenue was $176.3 million, above the high end of guidance, showing a 2% year-over-year improvement [33] - Gross margin was 67.8%, down year-over-year and sequentially, primarily due to a shift towards usage-based communication platform revenue [34] - Cash flow from operations exceeded $11 million for the quarter, with $82.2 million in cash, cash equivalents, and restricted cash at quarter-end [36] Business Line Data and Key Metrics Changes - Consumption-based revenue, primarily from CPaaS solutions, grew more than 30% year-over-year [14] - Usage-based revenue accounted for approximately 17% of total service revenue, up from 12% in Q1 2025 [33] - Revenue from customers using three or more products now accounts for about one-third of annual subscription revenue [22] Market Data and Key Metrics Changes - Adoption of the intelligent customer assistant rose 75% year-over-year, with voice interactions growing more than 7x year-over-year [18] - 8x8 is recognized as a top five Operator Connect partner worldwide, enhancing visibility in the ecosystem [17] Company Strategy and Development Direction - The company is transitioning from SKU-based selling to outcome-based selling, focusing on solutions rather than features [19] - The product roadmap includes enhancements with AI-enabled tools and a modern intuitive interface to improve customer outcomes [25] - The company is expanding internationally, targeting industries like retail, healthcare, and government [25] Management's Comments on Operating Environment and Future Outlook - Management noted that the headwinds from the Fuse upgrade are receding, with expectations of a 1.5% growth headwind for the next year [50][52] - Despite macro pressures, only 17% of enterprises plan to reduce customer engagement budgets, indicating a strong market for customer experience solutions [9] - The company remains confident in its long-term growth strategy and ability to execute against it, despite anticipated lower gross margins due to the growth of communications platform solutions [40] Other Important Information - The company made a $15 million term loan prepayment during Q1, reducing total debt by 40% since August 2022 [32] - Stock-based compensation as a percentage of revenue was 3.5%, reflecting a downward trend in this expense [36] Q&A Session Summary Question: What does the headwind from the Fuse migration look like? - The Fuse headwind to growth is about 3% in the last quarter, with expectations to retain roughly half of the remaining Fuse revenue as customers migrate to the 8x8 platform [49][50] Question: How do you see the margin profile evolving? - The usage-based margin profile is lower but growing faster, with expectations of a 1% to 2% increase in usage-based revenue per quarter [53][54] Question: How does the company weigh buying versus building in the AI space? - The company prefers building and partnering over buying, focusing on in-house AI development and partnerships with best-in-breed providers [58] Question: Are there any trends in legacy migrations? - The company is seeing a tailwind from legacy vendors facing challenges, which is beneficial for overall industry performance [63] Question: What is the growth outlook for the CPaaS business geographically? - The Asia business is growing rapidly, over 30% year-over-year, with traction also seen in the UK and the US [78]

Summary of Twilio Conference Call Company Overview - **Company**: Twilio - **CEO**: Khozema Shipchandler - **Industry**: Cloud Communications Key Points and Arguments Company Transformation - Twilio has undergone significant changes in the last two years, particularly under the leadership of the new CEO, focusing on financial rigor and operational discipline [5][6][8] - The company has shifted from cash burn to generating significant cash flow and achieving GAAP profitability, with high teen margins [6][9] - A reduction in workforce was part of the restructuring, aimed at aligning the company’s size with its strategic goals [8][9] Strategic Focus - Twilio is concentrating on three to five high-efficacy growth bets rather than spreading resources too thin across multiple initiatives [5] - The integration of communications, data, and AI is positioned as the core value proposition, enhancing customer engagement and driving revenue [11][12][19] Product Development and AI Integration - Twilio has launched products like Conversation Relay, which integrates customer data with communication channels, enhancing user experience [17][19] - The company emphasizes the importance of AI in improving customer interactions, particularly in voice communications, where AI can handle emotional nuances better than text [32][35] - AI capabilities are being integrated into existing products, with a focus on making these technologies accessible and easy to use for customers [20][23][66] Market Position and Competitive Advantage - Twilio claims a unique position in the market, combining data capabilities with communication and AI, which competitors have not achieved [19] - The company is focused on cross-selling opportunities, with 63% of customers currently using only one product, indicating significant growth potential [52][53] Growth Drivers - The growth strategy includes enhancing self-service capabilities and improving the experience for Independent Software Vendors (ISVs) [44][45] - Partnerships, particularly with Microsoft, are seen as a way to leverage technology and expand market reach [60][62] Financial Performance and Margin Expansion - Twilio aims to increase operating margins from 16% to 21-22% over the next few years, driven by operational efficiencies and product innovations [64][70] - The company is focused on maintaining a flat headcount while leveraging AI and automation to improve operational efficiency [66][69] Future Outlook - The company is optimistic about the growth trajectory, with expectations of double-digit growth driven by product innovation and market expansion [43][47] - The integration of new products and the focus on high ROI solutions are expected to enhance customer satisfaction and drive revenue growth [49][70] Additional Important Insights - The company has seen a resurgence in voice communications, with AI playing a crucial role in enhancing customer service interactions [31][32] - Twilio's approach to monetizing AI involves packaging it within broader service offerings rather than as standalone products [27][30] - The emphasis on creating enriching customer experiences through personalized communication is a key differentiator for Twilio [12][14]

Financial Data and Key Metrics Changes - Twilio reported Q1 2025 revenue of $1,172,000,000, representing a 12% year-over-year increase, marking the third consecutive quarter of double-digit revenue growth [5][15][20] - Non-GAAP income from operations reached a record $213,000,000, up 34% year-over-year, with a non-GAAP operating margin of 18.2%, an increase of 300 basis points year-over-year [15][18][20] - Free cash flow for the quarter was $178,000,000, despite a $122,000,000 payment related to annual cash bonuses [19][20] Business Line Data and Key Metrics Changes - Revenue from the Communications business was $1,097,000,000, up 13% year-over-year, driven by growth in messaging both in the U.S. and internationally [15][16] - Segment revenue was $76,000,000, reflecting a 1% year-over-year increase, with improvements in leading indicator metrics such as AE productivity and win rates [16][18] - The dollar-based net expansion rate for the Communications segment was 108%, while the Segment's rate was 94% [17] Market Data and Key Metrics Changes - All top five verticals, including financial services, tech, professional services, retail, and e-commerce, experienced growth in Q1 [29][30] - International messaging revenue mix increased year-over-year for the first time in over two years, contributing to the overall growth [60] Company Strategy and Development Direction - The company is focused on innovation, particularly in AI-driven products, and aims to enhance customer relationships through its platform [7][8][10] - Twilio is leveraging partnerships, such as with Eleven Labs, to enhance its AI voice capabilities and expand its product offerings [8][9] - The company is committed to maintaining price discipline and pursuing growth in international markets [60] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about Q2 and the remainder of the year, noting that there have been no significant adverse impacts from the macro environment as of April [6][21] - The company is taking a prudent approach to its outlook, incorporating conservatism in its guidance due to potential macro risks [21][30] - Management highlighted strong customer engagement and usage, indicating a healthy business environment despite broader economic uncertainties [21][52] Other Important Information - Twilio was recognized as a leader in the IDC MarketScape for CPaaS and by Omnia for its CDP universe leadership [10] - The company authorized a $2,000,000,000 share repurchase program, targeting to return an average of 50% of annual free cash flow to shareholders from 2025 through 2027 [20] Q&A Session Summary Question: What drove the upside to growth in the Communications segment in Q1? - Management noted broad strength across the business, particularly in messaging, with all top five verticals showing growth [28][29] Question: How do you see voice playing out over the medium term? - Management indicated that voice, driven by AI, is gaining traction, with increased interest from both new and existing customers [34][36] Question: Can you elaborate on multi-product adoption? - Management reported strong growth in customers adding multiple channels, particularly in advanced features and software add-ons [41][42] Question: How are you addressing competition in the market? - Management emphasized the importance of providing compelling solutions and differentiating through a broad set of capabilities [110] Question: What is the breakdown of use case mix across transactional versus marketing in messaging? - Management stated that the use case mix is roughly evenly split between verification, customer notification, and marketing [116]