Twilio Annual Report 2021

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FY2021 Annual Report · Twilio

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Annual Report
Annual Report
2021
2021

Key Metrics

Revenue ($M)1

Active Customer Accounts (K)2

3000

2500

2000

1500

1000

500

250

200

150

100

Dollar-Based Net Expansion Rate3

127%

2017

143%

2018

135%

2019

137%

2020

131%

2021

1 Represents reported revenue for the twelve months ended December 31, 2021.

2 Represents Active Customer Accounts as of December 31, 2021. Active Customer Accounts include the contribution from previously closed acquisitions, excluding

customer accounts from our Zipwhip business.

3 Represents data for the twelve months ended December 31, 2021. As previously disclosed in Twilio's Annual Report on Form 10-K filed with the SEC on March 2, 2020,

beginning with the three-month period ended March 31, 2020, we calculate our Dollar-Based Net Expansion Rate by comparing total revenue from a cohort of Active

Customer Accounts in a period to the same period in the prior year. To facilitate comparison between the periods presented, Dollar-Based Net Expansion Rate as presented

above has been calculated as if this calculation had been in effect during that each respective period. 2020 includes the impact from Twilio SendGrid. Twilio Segment,

Zipwhip, and other acquisitions closed after November 1, 2020 do not impact this calculation.

Please refer to Twilio’s most recent Annual Report on Form 10-K for details on the methodology for calculating Active Customer Accounts and Dollar-Based Net Expansion Rate.

Dear Twilio Stockholders,

A positron is a positively charged, energetic particle. It’s the antiparticle of the electron. I open this
year’s letter with this minutia of particle physics because we’ve decided to adopt the positron as a
symbol for the energy that we see in Twilio – but more broadly, in the community of builders we serve.

There’s a positive energy to the builders of the world. A more active stance than most. A willingness to
roll up their sleeves and get to work. An active desire to harness opportunities, to serve customers, to
see something exist that didn’t previously. A quickstart mentality.

Over the course of the pandemic, this positron spirit imbued so many Twilions and our customers. It
brought joy to our days, even in the most difficult hours. We cherish our front row seat, witnessing
builders solve problems that didn’t exist just days before. And of course, we love helping builders with
our products, and even more so, our people. Positrons like to share the energy.

In the past few months, we’ve seen it again – helping alleviate the humanitarian crisis in Ukraine and
the surrounding refugee crisis. In the weeks following Russia’s invasion, we saw The Norwegian
Refugee Council utilize our WhatsApp API to engage with people affected by the crisis and guide
response activities. Through Twilio’s integration with monday.com, refugees were able to access
information about resources available to them at different camps. And Migam, an organization based in
Poland, is connecting Ukrainian refugees who are deaf or hard of hearing to critical government and
financial services through instant access to a sign language interpreter via Twilio’s Video API. And
many more. Too many to name. Again, I find myself in awe of the builders.

Even though we hope to be nearing the end of pandemic times, we know the world will throw new
problems at the builders of the world. And that positively energetic spirit of builders will answer the call.
We’re proud to play a small role in it.

With that spirit, it’s my honor to pen Twilio’s 6th annual stockholder letter.

In 2021, we…

•

Powered more than 1 trillion interactions in over 180 countries, including over 25 billion calls,
127 billion messages, 1 trillion emails, and over 10 billion video minutes!

• Grew our active customer base from 221,000 to 256,000 including brands like Ford, RE/MAX,
Mercado Libre, HSBC, AB InBev and NatWest Group, ending the year with 36% of the Global
2,000 as customers.

•

Delivered elevated revenue growth of 61% year-over-year, reaching full year revenue of
$2.84 billion, and full year revenue dollar-based net expansion rate of 131%.

• Were named the #1 Customer Data Platform (CDP) for worldwide market share in 2021 (IDC
2020) after marrying Segment’s customer data platform with Twilio’s global engagement
capabilities.

•

Introduced the pilot of Twilio Engage, to empower marketers to leverage first-party data to
deliver true one-to-one customer engagement at scale.

Reached nearly half a billion Flex interactions, including 53 million chat sessions and 6 billion
voice minutes in 2021 and grew the number of active agents on Flex by more than 90% year-
over-year.

•

Added key new features to Flex, including supervisor ability to monitor queues in real time
within Flex insights, real time adherence feeds, outbound dialing and dial pad.

Expanded Twilio’s Build Partner Program, adding PWC as our newest Global Systems
Integrator.

Announced Twilio Regions, our new architecture which puts complete Twilio instances in
Europe and APAC. With multiple, independent instances of Twilio running around the world,
customers can architect for data residency, high availability, and low latency – wherever their
users are.

Supported hybrid workforces with Twilio Frontline, an app for front-line sales teams to build
lasting relationships with their customers over SMS and WhatsApp (with more channels to
come) – in a secure and compliant way.

Released Twilio Live, bringing live, interactive audio and video streaming use cases to Twilio’s
platform, with Reddit Talk as our launch customer.

Acquired Zipwhip and ValueFirst to bolster Twilio’s messaging capabilities and Ionic Security to
continue strengthening Twilio’s trusted communication channels.

Added 3,238 new employees, bringing us to 7,867 global Twilions as of December 31, 2021.
We expanded our leadership team with the additions of Chief Product Officer Eyal Manor and
Chief Legal Officer Dana Wagner. Chief Financial Officer Khozema Shipchandler stepped into
the new role of Chief Operating Officer and Marc Boroditsky expanded his role of Chief
Revenue Officer to assume responsibility for all of our customer- and partner-facing teams.
Former Massachusetts governor Deval Patrick also joined our Board of Directors.

• Won Fast Company’s Most Innovative Company award, earning the #1 position in the

Enterprise category and Fortune’s Best Workplaces in Technology (#19), the Bay Area (#22),
for Millenials (#33), for Women (#52) and Overall (#89), as well as Great Place to Work’s Best
Workplaces for Parents and a PEOPLE Companies that Care as we reimagine the future of
work.

•

Began implementing our new anti-racism program, with 83% of Twilions understanding how
Twilio is becoming an antiracist company based on our Q4 2021 employee engagement
survey.

Helped 511 million people by partnering with 7,624 social impact organizations using Twilio
(+92% YoY) and provided $66M in grants, donations, product credits and discounts to social
impact organizations (+106% YoY) through Twilio.org.

Partnered with over 1,200 organizations using Twilio to help vaccinate and educate over
324 million people in 2021 about Covid-19, to drive towards our goal to help one billion people
in two years receive access to the life-saving COVID-19 vaccine and trusted information
around the world.

Committed $18 million to nonprofits and NGOs focused on equitable vaccination, including
$10 million to Gavi, the Vaccine Alliance, in support of COVAX, the only global multilateral
initiative to provide COVID-19 vaccines to low and middle income countries.

I’m proud of what we accomplished in 2021. But in 2021, we also kicked off the next chapter of Twilio.
In the fullness of time, this may be our most lasting accomplishment of the year.

** Customer Engagement Platform **

At last year’s SIGNAL, I laid out Twilio’s vision for the future: to build the world’s leading customer
engagement platform trusted by developers, companies and now marketers globally. The Twilio
Customer Engagement Platform comprises three application pillars atop our leading data and
communications platforms. These three pillars strengthen engagement at each stage of the customer
journey – including our newly announced Twilio Engage for marketing, Twilio Frontline for sales and
Twilio Flex for the contact center.

Customer engagement is the sum of interactions that a company has with a customer across the
customer lifecycle – including marketing, sales and customer support. And, put simply, the brands that
have the best, most differentiated customer experience – who know their customers and personalize
every interaction – will win in today’s digital world.

Every B2C brand is trying to build the best digital presence to engage with their customers and build
direct, long-term relationships. However, data and business silos and privacy changes such as Apple’s
IDFA changes and Google’s planned deprecation of cookies make this extremely difficult. As a result,
brands are losing market share and loyalty to digital giants like Amazon who do this incredibly well
because they’ve built their own custom engagement cloud just for Amazon. The reality is that not every
company has billions of dollars and fleets of data science engineers at their disposal.

Take Allergan, a global pharmaceutical company that manufactures BOTOX® Cosmetic, JUVÉDERM®,
LATISSE® and other beauty products used by over four million people every year. Historically, Allergan
had a B2B2C business model, selling its products to healthcare providers who then re-sold them to
end consumers. As a result, Allergan invested the vast majority of its marketing focus on the doctors
reselling its products, and much less energy on end consumers. Facing more competition, Allergan
knew it needed to build better direct relationships with customers to continue growing. In order to do
that, the team needed to rebuild its technology stack, try new messaging tools, and create a
centralized source of customer data which was previously fragmented and disconnected. Allergan built
a powerful new customer engagement architecture with Twilio, Twilio Segment, and Snowflake that
allows its teams to deliver the right message directly to their patients. The personalization made
available by Twilio Segment enabled the company to relaunch its personalized customer loyalty
program, Alle¯ , resulting in more than $400M in direct-to-consumer sales in 2021, more than 3 million
more loyalty users and 40% of BOTOX® Cosmetic sales through DTC digital / Alle¯ points.
CRMs created 20 years ago are not designed for the digital world where every business is building
their own customer experience as a way to differentiate. They rely on salespeople manually entering
notes versus real-time and first-party customer data. Because of this, monolithic applications are
struggling to catch up with the explosion of digital channels to deliver the bespoke experiences that
their customers want and need. To Twilio, the next generation of B2C CRM looks nothing like its
predecessor. Instead, it’s an evolution of the category Twilio has been building for the last 13 years.

As the leading provider of cloud communication backed by the world’s #1 customer data platform
according to IDC, Twilio has an unparalleled view into the customer journey setting us up as the
company who can deliver on this opportunity to become the infrastructure that connects every
business with their customers digitally. To do this, we’re applying the Twilio approach to customer
engagement:

• One platform with global scale: Twilio’s customer engagement platform is built on top of the
same communications infrastructure and customer data infrastructure that businesses around
the world have already adopted. It provides one view of the customer and one set of
conversations at every step of the customer journey to deliver one-to-one personalization at
global scale.

•

First-party data: Data is the currency of the digital age, and the battle over it is reshaping the
internet. You must know your customers to own your future. Twilio enables first-party data
insights on every customer interaction then Twilio Segment, the brain or central nervous
system of the Customer Engagement Platform, brings it all together to provide actionable
insights that are most relevant to end consumers.

API-first: As every company is becoming a software company and building differentiated,
direct to consumer experiences, fixed-feature turnkey apps are getting in their way. Buying
infrastructure that lets companies build differentiation has proven to be the winning approach.
That’s why companies like Twilio, who provide API-first solutions, are winning in so many
categories. Twilio’s building blocks allow companies to build exactly what they need to serve
their customers and scale up and down with demand versus force-fitting costly out-of-the-box
software with features they’ll never use.

Twilio is the communications backbone for over 250,000 customers, used by over one-third of the
world’s developers, and underpinned by the best first-party CDP in the market to bring it all together.
We have a chance to become the infrastructure that connects every business with their customers
digitally to introduce true, personalized engagement and relationships in the next chapter of the cloud.
We’re on a journey to democratize customer engagement the way we’ve democratized
communications over the last 13 years.

While we made incredible progress toward our vision in 2021, we have even bigger ambitions for 2022!
In order to deliver on building the world’s leading customer engagement platform, we need to execute
on our “in and up” strategy, our mission and our values.

** Strategy: In and Up **

In 2008 when we started Twilio, venture investors believed that developers weren’t a market. They
didn’t hold the purse strings. Many early stage investors advised that we should pick a different route.
We hypothesized that developers would become increasingly influential in technology decisions. Not
because suddenly they’d be invited to the meeting. Not because they’d be given carte-blanche
spending authority. Rather, because the availability of low-cost, low-risk infrastructure-as-a-service
enables developers to pick up new tools and start building. This way of building also enabled speed,
agility, and de-risking of big projects – things that key stakeholders and budget-keepers care about –
and it worked.

Roll ahead 13 years, this hypothesis has borne out. But those early doubters weren’t entirely off-base.
Developers aren’t the ultimate economic buyer, but they are often the ones who open the door. It’s up
to us to walk in. This is the basis of our go-to-market motion, we call the “In-and-Up.” I first drew it in a
board deck, five years ago, with great sophistication:

Engagement Platform

API Platform

Executing the “In and Up” strategy consists of four things, really:

1. The API layer to bring developers, en masse, to the Twilio platform, and to get those services
adopted inside of every company. Our goal is to have Twilio in the toolbelt of every developer in
the world.

2. The Engagement Platform layer, aligned to line of business owners’ needs and the use-cases
for which developers are bringing Twilio in. This allows us to move from implementation to
strategic conversations over time. These solutions can be explored by developers, championed by
them, but they’re ultimately bought by business leaders (example: CX leader for Flex, CMO for
Engage).

3. The GTM motion working between the two, which we have to refine from initial developer
traction to greater solution selling, leveraging the commercial relationship that begins with easily
adopted APIs.

4. Imbuing first-party data, via Twilio Segment, across each of these properties. Our goal is to
deliver not just more communications, but more effective customer engagement over time.

As we execute the “In and Up” strategy, we move up the org chart of our customers, and up the value
chain to strategic software products that are more traditionally sold versus bought.

** Mission: Unlock the Imagination of Builders **

One of the things on my mind last year was the mission of the company. Twilio has grown up a lot in
the 13 years since we set out to “Fuel the Future of Communications.” While it served us well, that
mission never felt quite right to me – it’s not really what gets me up in the morning, or most Twilions I
have known. Yet, it worked.

Today, our ambitions go well beyond communications. As we break open the box of customer
engagement, democratize it as infrastructure for developers and companies to innovate upon, and
deliver it with our usage-based model, we are clearly beyond “the future of communications.” So last
year, we finally revisited the mission statement.

In talking with long-time and new members of the team, I’ve realized that the thing that we most
cherish – the thing that gets us out of bed in the morning – is not communications, but invention.
Creation. We’re awed by what we enable people to build. We were amazed when ING Bank, with a
small group of developers, decided to re-imagine their contact center, replacing 17 legacy vendor
solutions with their own creation built on Twilio, powering 14 different entities at the bank. We were
inspired when Max Little, a researcher who created the Parkinson’s Voice Initiative, proved that in 60
seconds, with a simple phone call, a patient can be diagnosed with the early signs of Parkinson’s
disease. We were inspired by Doug McKenzie, the magician who heard of Twilio and taught himself to
code, so he could build a magic show using Twilio to amaze and delight (and bewilder) his audience.
We love demonstrating our own creativity at SIGNAL each year – live coding to build something in front
of the audience. The implicit message: if we can do it, so can you. There’s a reason we always say: “I
can’t wait to see what you build.”

Building is core to Twilio. And we get most excited when customers invent something novel with our
platform – that we never could have imagined. So at Twilio, we celebrate the DOers who hack
something fun, like Lindsay Pettingill who built a WhatsApp bot to tell her more about the places she’s
visiting or Dad-to-be, Amit, who built https://howbigisthebaby.io using Twilio + Airtable to receive daily
size comparisons for his baby via SMS. We celebrate business leaders who challenge their teams to
solve major business problems with our software, like Vacasa who has been able to achieve 3x more
bookings and remove friction from customers’ vacation experiences with personalized customer

engagement using Twilio and Twilio Segment. We celebrate the doers who utilize Twilio in new and
innovative ways to solve real world issues like RoboRecruiter who redeployed their recruiting platform to
screen 5,000 COVID-19 vaccination site workers in London in 24 hours through Twilio SMS and email.

Our new mission is a better articulation of the true motivation of Twilio: To unlock the imagination of
builders.

Unlike most software companies, we don’t walk in and say “you’ve got a problem… just buy our
solution, sit back, and all of your problems will be solved” because we know that’s not how the world
works. We believe that companies who just buy solutions ultimately are frustrated by their own inability
to win. And that’s why we walk in and say “You have a vision and we’re going to help you unlock it.”

** Principles and Values **

In 2021, we brought to life a new articulation of our values, the Twilio Magic. I’m very proud of this
articulation. But why?

I think of company culture as a feeling you get when you come to work. How does it feel to make
decisions? To win together? To lose together? To disagree? The sum of these work experiences is the
company culture. You feel it when you wake up, when you go to sleep, and every time you enter a new
interaction with your colleagues. Are you full of energy and excitement? Dread and fear? That’s culture
at work. It’s a feeling.

Values are handles you put on that feeling. With handles, you can steer the culture. You can talk about
it. You can intentionally guide it in a healthy direction. The values aren’t something you create. Rather,
you introspect, articulate and amplify what’s already there.

We’ve had multiple iterations of our values through the years, despite describing a largely same
culture. I’ve noticed a funny thing about how people react to values. People want fewer values, so they
can memorize them and regurgitate them easily. This seems to be a trained corporate expectation. At
the same time, people want values to be real – not empty words on the wall.

The alternative to values are principles. I think principles are “things we believe to be true.” In that
context, wouldn’t it be ridiculous to artificially limit the number of “things we believe to be true?”
Imagine having 10 laws of physics, and upon discovering the 11th, saying “Nope! We already have too
many!” Therein lies the difference between values and principles.

The Twilio Magic was last drafted in 2018. At that time, we limited ourselves to 10 values – which is
both too many to easily remember, and not enough to encapsulate “things we believe to be true.” So in
2021, we took to re-articulating the Twilio Magic with the distinction between “values” and “principles”
in mind.

I’m very excited by the resulting framework.

We now have four core values:

• We are builders. We love hard problems and believe in the indomitable power of people’s

ability to create a better world through ingenuity and resourcefulness. We reject the “can’t be
done” and believe bold ideas and fearless iteration can resolve the most challenging problems
for our customers and the world they operate in.

• We are owners. We take accountability and see things through. We take the long view, sweat
the details, and think about how our work makes Twilio better every day. We recognize that we
and others do our best work when we feel both empowered and accountable for outcomes.

• We are curious. We see ourselves as works in progress. We know that we don’t have all the

answers, humbly seek the truth, and strive to get better every day. As individuals, as a
company, and in our products, we seek continual progress over perfection and acknowledge
shortcomings as a matter of fact. Progress comes not from avoiding mistakes or hard truths,
but in learning from them.

• We are positrons. As I mentioned in the top of this letter, a positron is a positively charged

electron. We are optimists who believe that positive energy is contagious and caring is critical.
We are genuinely excited to serve and help others. We seek to be bright spots for the people
around us in every interaction, and we stand up and work for what we believe is good and right
for our customers, our company, our communities and the world at large.

Importantly, we articulate them as four overlapping circles:

In our best moments, we sit at the center, perfectly balancing the four values. However, more often,
we’re somewhere a bit off center. In fact, we’ve given names to the behavioral flaws we exhibit when
we’re off-center. For example, in moments when I’m a Builder, I’m Curious, and I’m a Positron, but
falling short as an Owner… I’m being a “Lovable Renter.” See the definitions:

Most values-systems only define the good – defining what the values *are*. Over time, I believe we’ll
find that our key innovation here was defining what the behaviors look like when we’re missing one of
the values. This is a tool. None of us are perfect, and we’re always looking to improve. Just as values
are handles on the culture, the off-center definitions give us a new kind of handle: on the behaviors we
can work to fix!

How do you go about correcting yourself toward the center? We’ve inserted our principles in service of
the values. For example, our beloved “Draw the Owl” principle helps us act as better builders. If an
employee finds themselves needing to boost their “builder” behavior, then maybe working on “Drawing
the Owl” will show the way. Because the principles are now a toolkit, we’ve eliminated the illusion that
good corporate citizens have them memorized. And we’re free to add more over time as we discover
more true things!

Together, four short memorable values, along with a set of accompanying principles, or “things we
believe to be true,” provide a toolkit for assessment, improvement, and shared cultural understanding
of how we get our work done together. I’m excited where this living framework will take us!

** Onward **

As you can see, 2021 was an exciting year for Twilio. We unveiled the next layer of our platform,
redefined our mission, and rearticulated our values and principles. More than a decade after our
founding, we spent 2021 teeing up the next decade of Twilio. More than ever, it’s Day One for Twilio.
Customers keep leading us to bigger, juicier, and more interesting opportunities. And I’m excited to
tackle them with all of you – our customers, our employees, our stockholders and our communities.

Onward!

-jeff

TWILIO INC.
101 SPEAR STREET, FIRST FLOOR
SAN FRANCISCO, CALIFORNIA 94105
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
To Be Held at 9:00 a.m. Pacific Time on Wednesday, June 22, 2022

Dear Stockholders of Twilio Inc.:

We cordially invite you to attend the 2022 annual meeting of stockholders (the “Annual Meeting”) of Twilio Inc., a Delaware
corporation, which will be held virtually on Wednesday, June 22, 2022 at 9:00 a.m. Pacific Time via live audio webcast on the Internet
at www.virtualshareholdermeeting.com/TWLO2022, for the following purposes, as more fully described in the accompanying proxy
statement:

1. To elect the two Class III directors named in the proxy statement to serve until the 2025 annual meeting of stockholders

and until their successors are duly elected and qualified;

2. To ratify the appointment of KPMG LLP as our independent registered public accounting firm for our fiscal year

ending December 31, 2022;

3. To conduct a non-binding advisory vote to approve the compensation of our named executive officers; and

4. To transact such other business as may properly come before the Annual Meeting or any adjournments or

postponements thereof.

We have adopted a virtual format for our Annual Meeting to provide a consistent experience to all stockholders regardless of

location. You will be able to attend the meeting, vote and submit your questions during the meeting at
www.virtualshareholdermeeting.com/TWLO2022. As always, we encourage you to vote your shares prior to the Annual Meeting
either by telephone, Internet or by proxy card to help make this meeting format as efficient as possible.

Our board of directors has fixed the close of business on April 25, 2022 as the record date for the Annual Meeting. Only

stockholders of record on April 25, 2022 are entitled to notice of and to vote at the Annual Meeting. A list of stockholders of record
will be available for inspection by stockholders of record during normal business hours for ten days prior to the Annual Meeting for
any legally valid purpose at our corporate headquarters at 101 Spear Street, First Floor, San Francisco, California 94105. For access
to the stockholder list, please contact us at legalnotices@twilio.com. The stockholder list will also be available during the Annual
Meeting at www.virtualshareholdermeeting.com/TWLO2022. Further information regarding voting rights and the matters to be voted
upon are presented in the accompanying proxy statement.

Important Notice Regarding the Availability of Proxy Materials for the Annual Meeting to Be Held on Wednesday, June 22,
2022, at 9:00 a.m. Pacific Time via live audio webcast at www.virtualshareholdermeeting.com/TWLO2022: On or about May 5, 2022,
we expect to mail to our stockholders a Notice of Internet Availability of Proxy Materials (the “Notice”) containing instructions on
how to access our proxy statement for our Annual Meeting (the “Proxy Statement”) and our Annual Report on Form 10-K for the
fiscal year ended December 31, 2021 (the “Annual Report”) and vote online. The Proxy Statement and the Annual Report can be
accessed directly at www.proxyvote.com. All you have to do is enter your 16-digit control number located on your proxy card. If you
attend the Annual Meeting virtually, you may withdraw your proxy and vote online during the Annual Meeting if you so choose. The
Notice also contains instructions on how each of our stockholders can receive a paper copy of our proxy materials, including the Proxy
Statement, Annual Report and a form of proxy card or voting instruction form. All stockholders who do not receive the Notice,
including stockholders who have previously requested to receive paper copies of proxy materials, will receive a paper copy of the
proxy materials by mail unless they have previously requested delivery of proxy materials electronically. Please note, however, that if
your shares are held of record by a broker, bank, or other nominee and you wish to vote at the meeting, you must obtain a proxy
issued in your name from that record holder.

YOUR VOTE IS IMPORTANT. Whether or not you plan to attend the Annual Meeting, we urge you to submit your vote via the
Internet, telephone or mail as soon as possible to ensure that your shares are represented. For additional instructions on voting by
telephone or the Internet, please refer to your proxy card. Returning the proxy does not deprive you of your right to attend the
Annual Meeting and to vote your shares at the Annual Meeting.

We appreciate your continued support of Twilio.

By order of the board of directors,

P
r
o
x
y

Jeff Lawson
Co-Founder, Chief Executive Officer and Chairperson of the Board
San Francisco, California
May 5, 2022

Table of Contents

PROCEDURAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

BOARD OF DIRECTORS AND CORPORATE GOVERNANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PROPOSAL NO. 1—ELECTION OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PROPOSAL NO. 2—RATIFICATION OF APPOINTMENT OF INDEPENDENT REGISTERED

PUBLIC ACCOUNTING FIRM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PROPOSAL NO. 3—NON-BINDING ADVISORY VOTE TO APPROVE THE COMPENSATION

OF OUR NAMED EXECUTIVE OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

REPORT OF THE AUDIT COMMITTEE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

EXECUTIVE OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

COMPENSATION DISCUSSION AND ANALYSIS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

COMPENSATION AND TALENT MANAGEMENT COMMITTEE REPORT . . . . . . . . . . . . . . .

EQUITY COMPENSATION PLAN INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT . . . . . . . .

CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS . . . . . . . . . . . . . . . . . . . . . .

OTHER MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

APPENDIX A . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . A-1

Forward-Looking Statements

This proxy statement contains forward-looking statements within the meaning of the federal securities

laws, 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 proxy statement include, but are not limited to, statements about: our
environmental, social, and governance efforts, our sustainability goals and our proposed sublease. You
should not rely upon forward-looking statements as predictions of future events. The outcome of the
events described in these forward-looking statements is subject to known and unknown risks, uncertainties,
and other factors that may cause our actual results, performance, or achievements to differ materially from
those described in the forward-looking statements.

The forward-looking statements contained in this proxy statement are also subject to additional risks,

uncertainties, and factors, including those more fully described in our most recent filings with the
Securities and Exchange Commission (the “SEC”), including our Quarterly Report on Form 10-Q for the
quarter ended March 31, 2022. Further information on potential risks that could affect actual results will
be included in the subsequent periodic and current reports and other filings that we make with the SEC
from time to time. Moreover, we operate in a very competitive and rapidly changing environment, and new

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risks and uncertainties may emerge that could have an impact on the forward-looking statements
contained in this proxy statement.

Forward-looking statements represent our management’s beliefs and assumptions only as of the date
such statements are made. We undertake no obligation to update any forward-looking statements made in
this proxy statement to reflect events or circumstances after the date of this proxy statement or to reflect
new information or the occurrence of unanticipated events, except as required by law.

TWILIO INC.

PROXY STATEMENT
FOR
2022 ANNUAL MEETING OF STOCKHOLDERS

PROCEDURAL MATTERS

This proxy statement and the enclosed form of proxy are furnished in connection with the solicitation of

proxies by our board of directors for use at the 2022 annual meeting of stockholders of Twilio Inc., a
Delaware corporation (referred to in this proxy statement as “Twilio,” the “Company,” “we,” “us,” or “our”),
and any postponements, adjournments or continuations thereof (the “Annual Meeting”). The Annual
Meeting will be held virtually on Wednesday, June 22, 2022 at 9:00 a.m. Pacific Time via live audio webcast.
You will be able to attend the virtual Annual Meeting, vote your shares electronically and submit your
questions during the live audio webcast of the meeting by visiting www.virtualshareholdermeeting.com/
TWLO2022 and entering your 16-digit control number located on your proxy card. The Notice of Internet
Availability of Proxy Materials (the “Notice”) containing instructions on how to access this proxy statement
and our annual report is first being mailed on or about May 5, 2022 to all stockholders entitled to vote at the
Annual Meeting.

The information provided in the “question and answer” format below is for your convenience only
and is merely a summary of the information contained in this proxy statement. You should read this entire
proxy statement carefully. Information contained on, or that can be accessed through, our website is not
intended to be incorporated by reference into this proxy statement and references to our website address
in this proxy statement are inactive textual references only.

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What matters am I voting on?

You will be voting on:

• the election of the two Class III directors named in the proxy statement to serve until the 2025

annual meeting of stockholders and until their successors are duly elected and qualified;

• a proposal to ratify the appointment of KPMG LLP as our independent registered public

accounting firm for our fiscal year ending December 31, 2022;

• a proposal to conduct a non-binding advisory vote to approve the compensation of our named

executive officers; and

• any other business as may properly come before the Annual Meeting.

How does the board of directors recommend I vote on these proposals?

Our board of directors recommends a vote:

• “FOR” the election of Donna L. Dubinsky and Deval Patrick as Class III directors;

• “FOR” the ratification of the appointment of KPMG LLP as our independent registered public

accounting firm for our fiscal year ending December 31, 2022; and

• “FOR” the approval, on a non-binding advisory basis, of the compensation of our named executive

officers, as disclosed in this proxy statement.

Who is entitled to vote?

Holders of either class of our common stock as of the close of business on April 25, 2022, the record

date for the Annual Meeting, may vote at the Annual Meeting. As of the record date, there were
171,843,299 shares of our Class A common stock outstanding and there were 9,817,605 shares of our
Class B common stock outstanding. Our Class A common stock and Class B common stock will vote as a
single class on all matters described in this proxy statement for which your vote is being solicited.
Stockholders are not permitted to cumulate votes with respect to the election of directors. Each share of
Class A common stock is entitled to one vote on each proposal and each share of Class B common stock is
entitled to 10 votes on each proposal. Our Class A common stock and Class B common stock are
collectively referred to in this proxy statement as our “common stock.”

Registered Stockholders.

If shares of our common stock are registered directly in your name with our

transfer agent, you are considered the stockholder of record with respect to those shares, and the Notice
was provided to you directly by us. As the stockholder of record, you have the right to grant your voting
proxy directly to the individuals listed on the proxy card or to vote online at the Annual Meeting.
Throughout this proxy statement, we refer to these registered stockholders as “stockholders of record.”

Street Name Stockholders.

If shares of our common stock are held on your behalf in a brokerage

account or by a bank or other nominee, you are considered to be the beneficial owner of shares that are
held in “street name,” and the Notice was forwarded to you by your broker or nominee, who is considered
the stockholder of record with respect to those shares. As the beneficial owner, you have the right to direct
your broker, bank or other nominee as to how to vote your shares. Beneficial owners are also invited to
attend the Annual Meeting. However, since a beneficial owner is not the stockholder of record, you may
not vote your shares of our common stock by Internet at the Annual Meeting unless you follow your
broker’s procedures for obtaining a legal proxy. If you request a printed copy of our proxy materials by
mail, your broker, bank or other nominee will provide a voting instruction form for you to use. Throughout
this proxy statement, we refer to stockholders who hold their shares through a broker, bank or other
nominee as “street name stockholders.”

How many votes are needed for approval of each proposal?

• Proposal No. 1: The election of directors requires a plurality of the voting power of the shares of

our common stock present virtually or by proxy at the Annual Meeting and entitled to vote thereon
to be approved. “Plurality” means that the nominees who receive the largest number of “For” votes
cast are elected as directors. As a result, any shares not voted “For” a particular nominee (whether
as a result of stockholder abstention or a broker non-vote) will not be counted in such nominee’s
favor and will have no effect on the outcome of the election. You may vote “For” or “Withhold” on
each of the nominees for election as a director.

• Proposal No. 2: The ratification of the appointment of KPMG LLP as our independent registered
public accounting firm for our fiscal year ending December 31, 2022 requires the affirmative vote of
a majority of the voting power of the shares of our common stock present virtually or by proxy at
the Annual Meeting and entitled to vote thereon to be approved. Abstentions are considered shares
present and entitled to vote on this proposal, and thus, will have the same effect as a vote “Against”
this proposal. Broker non-votes will have no effect on the outcome of this proposal.

• Proposal No. 3: A majority of the voting power of the shares of our common stock present

virtually or by proxy at the Annual Meeting and entitled to vote thereon is required to approve the
compensation of our named executive officers. Since this proposal is an advisory vote, the result will
not be binding on our board of directors, our compensation and talent management committee, or
the Company. The board of directors and our compensation and talent management committee will
consider the outcome of the vote when determining the compensation of our named executive
officers. Abstentions are considered shares present and entitled to vote on this proposal, and thus,

will have the same effect as a vote “Against” this proposal. Broker non-votes will have no effect on
the outcome of this proposal.

What is a quorum?

A quorum is the minimum number of shares required to be present at the Annual Meeting to
properly hold an annual meeting of stockholders and conduct business under our second amended and
restated bylaws and Delaware law. The presence, virtually or by proxy, of the holders of a majority of the
voting power of all issued and outstanding shares of our common stock entitled to vote at the Annual
Meeting will constitute a quorum at the Annual Meeting. Abstentions, withheld votes and broker
non-votes are counted as shares present and entitled to vote for purposes of determining a quorum.

How do I vote?

If you are a stockholder of record, there are four ways to vote:

• by Internet at www.proxyvote.com, 24 hours a day, seven days a week, until 8:59 p.m. Pacific Time

on June 21, 2022 (have your Notice or proxy card in hand when you visit the website);

• by toll-free telephone at 1-800-690-6903, until 8:59 p.m. Pacific Time on June 21, 2022 (have your

Notice or proxy card in hand when you call);

• by completing and mailing your proxy card (if you received printed proxy materials); or

• by Internet during the Annual Meeting. Instructions on how to attend and vote at the Annual

Meeting are described at www.virtualshareholdermeeting.com/TWLO2022.

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If you plan to attend the Annual Meeting, we recommend that you also vote by proxy so that your vote

will be counted if you later decide not to attend the Annual Meeting.

If you are a street name stockholder, you will receive voting instructions from your broker, bank or
other nominee. You must follow the voting instructions provided by your broker, bank or other nominee in
order to direct your broker, bank or other nominee on how to vote your shares. Street name stockholders
should generally be able to vote by returning a voting instruction form, or by telephone or on the Internet.
However, the availability of telephone and Internet voting will depend on the voting process of your
broker, bank or other nominee. As discussed above, if you are a street name stockholder, you may not vote
your shares by Internet at the Annual Meeting unless you obtain a legal proxy from your broker, bank or
other nominee.

Can I change my vote?

Yes. If you are a stockholder of record, you can change your vote or revoke your proxy any time

before the Annual Meeting by:

• entering a new vote by Internet or by telephone;

• completing and returning a later-dated proxy card;

• notifying the Corporate Secretary of Twilio Inc., in writing, at 101 Spear Street, First Floor, San

Francisco, California 94105; or

• attending and voting electronically at the Annual Meeting (although attendance at the Annual

Meeting will not, by itself, revoke a proxy).

We encourage stockholders to reach out to us by e-mail at legalnotices@twilio.com instead of physical

mail to help ensure prompt receipt of any communications related to voting.

If you are a street name stockholder, your broker, bank or other nominee can provide you with

instructions on how to change your vote.

Why won’t there be an in-person meeting this year?

We are leveraging technology to hold a virtual Annual Meeting that expands convenient access to,

and enables participation by, stockholders from any location around the world. We believe the virtual
format encourages attendance and participation by a broader group of stockholders, while also reducing
the costs and environmental impact associated with an in-person meeting. You will be able to vote and
submit your questions during the meeting at www.virtualshareholdermeeting.com/TWLO2022. There will
not be a physical meeting location. Our virtual Annual Meeting will be governed by our rules of conduct
and procedures, which will be posted at www.virtualshareholdermeeting.com/TWLO2022 on the date of
the Annual Meeting. We have designed the format of the virtual Annual Meeting so that stockholders
have the same rights and opportunities to vote and participate as they would have at a physical meeting.
Stockholders will be able to submit questions online before and during the meeting, providing our
stockholders with the opportunity for meaningful engagement with the Company.

What do I need to be able to attend the Annual Meeting online?

We will be hosting our Annual Meeting via live audio webcast only. If you are a stockholder as of the

record date of April 25, 2022 and wish to virtually attend the Annual Meeting, you will need the 16-digit
control number, which is located on your Notice of Internet Availability of Proxy Materials or on your
proxy card (if you receive a printed copy of the proxy materials). Instructions on how to participate in the
Annual Meeting are also posted online at www.proxyvote.com. The webcast will start at 9:00 a.m., Pacific
Time on June 22, 2022. Stockholders may vote and ask questions while attending the Annual Meeting
online.

Use of cameras and recording devices is prohibited while virtually attending the live audio webcast.

What is the effect of giving a proxy?

Proxies are solicited by and on behalf of our board of directors. Jeff Lawson and Khozema

Shipchandler have been designated as proxy holders by our board of directors. When proxies are properly
dated, executed and returned, the shares represented by such proxies will be voted at the Annual Meeting
in accordance with the instructions of the stockholder. If no specific instructions are given, however, the
shares will be voted in accordance with the recommendations of our board of directors as described above.
If any matters not described in this proxy statement are properly presented at the Annual Meeting, the
proxy holders will use their own judgment to determine how to vote the shares. If the Annual Meeting is
adjourned, the proxy holders can vote the shares on the new Annual Meeting date as well, unless you have
properly revoked your proxy instructions, as described above.

Why did I receive a Notice of Internet Availability of Proxy Materials instead of a full set of proxy

materials?

In accordance with the rules of the SEC, we have elected to furnish our proxy materials, including this

proxy statement and our annual report, primarily via the Internet. The Notice containing instructions on
how to access our proxy materials is first being mailed on or about May 5, 2022 to all stockholders entitled
to vote at the Annual Meeting. Stockholders may request to receive all future proxy materials in printed
form by mail or electronically by e-mail by following the instructions contained in the Notice. We
encourage stockholders to take advantage of the availability of our proxy materials on the Internet to help
reduce the environmental impact and cost of our annual meetings of stockholders.

How are proxies solicited for the Annual Meeting?

Our board of directors is soliciting proxies for use at the Annual Meeting. All expenses associated

with this solicitation will be borne by us. We will reimburse brokers or other nominees for reasonable
expenses that they incur in sending our proxy materials to you if a broker, bank or other nominee holds

shares of our common stock on your behalf. In addition, our directors and employees may also solicit
proxies in person, by telephone or by other means of communication. Our directors and employees will not
be paid any additional compensation for soliciting proxies.

How may my brokerage firm or other intermediary vote my shares if I fail to provide timely directions?

Brokerage firms and other intermediaries holding shares of our common stock in street name for their

customers are generally required to vote such shares in the manner directed by their customers. In the
absence of timely directions, your broker will have discretion to vote your shares on our sole “routine”
matter: the proposal to ratify the appointment of KPMG LLP as our independent registered public
accounting firm for our fiscal year ending December 31, 2022. Your broker will not have discretion to vote
on any other proposals, which are “non-routine” matters, absent direction from you.

Where can I find the voting results of the Annual Meeting?

We will announce preliminary voting results at the Annual Meeting. We will also disclose voting
results on a Current Report on Form 8-K that we will file with the SEC within four business days after the
Annual Meeting. If final voting results are not available to us in time to file a Current Report on Form 8-K
within four business days after the Annual Meeting, we will file a Current Report on Form 8-K to publish
preliminary results and will provide the final results in an amendment to the Current Report on Form 8-K
as soon as they become available.

I share an address with another stockholder, and we received only one paper copy of the proxy materials.

How may I obtain an additional copy of the proxy materials?

We have adopted a procedure called “householding,” which the SEC has approved. Under this
procedure, we deliver a single copy of the Notice and, if applicable, our proxy materials, to multiple
stockholders who share the same address, unless we have received contrary instructions from one or more
of such stockholders. This procedure reduces our printing costs, mailing costs and fees. Stockholders who
participate in householding will continue to be able to access and receive separate proxy cards. Upon
written or oral request, we will deliver promptly a separate copy of the Notice and, if applicable, our proxy
materials, to any stockholder at a shared address to which we delivered a single copy of any of these
materials. To receive a separate copy, or, if a stockholder is receiving multiple copies, to request that we
only send a single copy of the Notice and, if applicable, our proxy materials, such stockholder may contact
us at (415) 914-1444 or:

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Twilio Inc.
Attention: Investor Relations
101 Spear Street, First Floor
San Francisco, California 94105
ir@twilio.com

We encourage stockholders to contact us by telephone or e-mail instead of physical mail to help

ensure timely receipt of any request for proxy materials.

Street name stockholders may contact their broker, bank or other nominee to request information

about householding.

What is the deadline to propose actions for consideration at next year’s annual meeting of stockholders or

to nominate individuals to serve as directors?

Stockholder Proposals

Stockholders may present proper proposals for inclusion in our proxy statement and for consideration

at next year’s annual meeting of stockholders by submitting their proposals in writing to our Corporate

Secretary in a timely manner. For a stockholder proposal to be considered for inclusion in our proxy
statement for the 2023 annual meeting of stockholders, our Corporate Secretary must receive the written
proposal at our principal executive offices not later than January 5, 2023. In addition, stockholder
proposals must comply with the requirements of Rule 14a-8 regarding the inclusion of stockholder
proposals in company-sponsored proxy materials. Stockholder proposals should be addressed to:

Twilio Inc.
Attention: Corporate Secretary
101 Spear Street, First Floor
San Francisco, California 94105

Our second amended and restated bylaws also establish an advance notice procedure for stockholders

who wish to present a proposal before an annual meeting of stockholders but do not intend for the
proposal to be included in our proxy statement. Our second amended and restated bylaws provide that the
only business that may be conducted at an annual meeting of stockholders is business that is (i) specified in
our proxy materials with respect to such annual meeting, (ii) otherwise properly brought before such
annual meeting by or at the direction of our board of directors or (iii) properly brought before such
meeting by a stockholder of record entitled to vote at such annual meeting who has delivered timely
written notice to our Corporate Secretary, which notice must contain the information specified in our
second amended and restated bylaws. To be timely for the 2023 annual meeting of stockholders, our
Corporate Secretary must receive the written notice at our principal executive offices:

• not earlier than the close of business on February 19, 2023; and

• not later than the close of business on March 21, 2023.

In the event that we hold the 2023 annual meeting of stockholders more than 30 days before or more
than 60 days after the one-year anniversary of the Annual Meeting, then, for notice by the stockholder to
be timely, it must be received by the secretary not earlier than the close of business on the 120th day prior
to such annual meeting and not later than the close of business on the later of the 90th day prior to such
annual meeting, or the tenth day following the day on which public announcement of the date of such
annual meeting is first made.

If a stockholder who has notified us of his, her or its intention to present a proposal at an annual
meeting of stockholders does not appear to present his, her or its proposal at such annual meeting, we are
not required to present the proposal for a vote at such annual meeting.

Nomination of Director Candidates

Holders of our common stock may propose director candidates for consideration by our nominating

and corporate governance committee. Any such recommendations should include the nominee’s name and
qualifications for membership on our board of directors and should be directed to our Chief Legal Officer
at the address set forth above. For additional information regarding stockholder recommendations for
director candidates, see the section titled “Board of Directors and Corporate Governance—Stockholder
Recommendations and Nominations to the Board of Directors.”

In addition, our second amended and restated bylaws permit stockholders to nominate directors for
election at an annual meeting of stockholders. To nominate a director, the stockholder must provide the
information required by our second amended and restated bylaws. In addition, the stockholder must give
timely notice to our Corporate Secretary in accordance with our second amended and restated bylaws,
which, in general, require that the notice be received by our Corporate Secretary within the time periods
described above under the section titled “Stockholder Proposals” for stockholder proposals that are not
intended to be included in a proxy statement.

In addition to satisfying the foregoing requirements under our second amended and restated bylaws,

to comply with the universal proxy rules in connection with our 2023 annual meeting, stockholders who

intend to solicit proxies in support of director nominees other than our nominees must provide notice that
sets forth the information required by Rule 14a-19 under the Securities Exchange Act of 1934, as amended
(the “Exchange Act”) to our Corporate Secretary at the address set forth above no later than April 23,
2023.

Availability of Bylaws

A copy of our second amended and restated bylaws is available via the SEC’s website at

http://www.sec.gov. You may also contact our Corporate Secretary at the address set forth above for a
copy of the relevant bylaw provisions regarding the requirements for making stockholder proposals and
nominating director candidates.

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BOARD OF DIRECTORS AND CORPORATE GOVERNANCE

Our business and affairs are managed under the direction of a highly experienced, qualified and

diverse board of directors.
INDEPENDENCE

DIVERSITY

TENURE

88%
Independent

38%
Diverse

~6.6
Years

Independent

Non-independent

Non-Diverse

Female

Racial/Ethnic Diversity (Black)

<4 years

4–8 years

9+ years

Our board of directors consists of eight directors. All of our board members, other than Mr. Lawson,

qualify as “independent” under the listing standards of The New York Stock Exchange (the “NYSE Listing
Standards”) and the listing standards of The Long-Term Stock Exchange (the “LTSE Listing Standards”).
Our board of directors is divided into three staggered classes of directors. At each annual meeting of
stockholders, a class of directors will be elected for a three-year term to succeed the class whose term is
then expiring. The following table sets forth the names, ages as of April 30, 2022, and certain other
information for each of the members of our board of directors with terms expiring at the Annual Meeting
(who are also nominees for election as a director at the Annual Meeting) and for each of the continuing
members of our board of directors:

Director
Since

Current
Term
Expires

Expiration
of Term
for Which
Nominated Independent

Audit
Committee

Class Age

Compensation
and Talent
Management
Committee

Nominating
and
Corporate
Governance
Committee

Directors with Terms

Expiring at the Annual
Meeting/Nominees

Donna L. Dubinsky . . . .
Deval Patrick . . . . . . . . .
Continuing Directors
Jeff Lawson . . . . . . . . . .
Richard Dalzell
. . . . . . .
Byron Deeter . . . . . . . . .
Jeff Epstein . . . . . . . . . .
Jeffrey Immelt . . . . . . . .
Erika Rottenberg . . . . . .

Nominees for Director

III
III

II
I
II
II
I
I

66
65

44
64
47
65
66
59

2018
2021

2008
2014
2010
2017
2019
2016

2022
2022

2024
2023
2024
2024
2023
2023

2025
2025

—
—
—
—
—
—

✓
✓

✓
✓
✓
✓
✓

✓

✓
✓

✓

Donna L. Dubinsky. Ms. Dubinsky has served as a member of our board of directors since December

2018. Ms. Dubinsky is a co-founder of Numenta, Inc., a machine intelligence company, and has served as
its Chief Executive Officer since 2005. Ms. Dubinsky also co-founded Handspring, a maker of Palm
OS-based Visor- and Treo-branded personal digital assistants, and served as President and Chief Executive
Officer of Handspring from 1998 to 2003, and as Acting Chief Financial Officer from 2002 to 2003. From
1992 to 1998, Ms. Dubinsky served as President and Chief Executive Officer of Palm Computing, Inc., one
of the first companies to develop and design handheld computers and smartphones. From 1982 to 1991,
Ms. Dubinsky served in a multitude of sales, sales support, and logistics functions at both Apple Inc. and

Claris, an Apple software subsidiary. Ms. Dubinsky previously served on the board of Intuit Inc. and Yale
University, including two years as Senior Fellow. Ms. Dubinsky holds a B.A. from Yale University, and an
M.B.A. from Harvard Business School.

Ms. Dubinsky was selected to serve on our board of directors because of her experience as an

entrepreneur and her industry experience.

Deval Patrick. Mr. Patrick has served as a member of our board of directors since January 2021. He

is currently co-director of the Center for Public Leadership and Professor of Practice at the Harvard
Kennedy School. Since March 2021, he has served as a Senior Advisor to Bain Capital and co-chair of
American Bridge 21st Century. Mr. Patrick is the founding partner and, from 2015 to 2020, was the
Managing Director of Bain Capital Double Impact, a private equity fund that invested in commercial
businesses for both financial return and measurable social or environmental good. Before that, he served
for two terms as governor of the Commonwealth of Massachusetts. Mr. Patrick has been a senior executive
in two Fortune 50 companies, a partner in two Boston law firms, and served as head of the Civil Rights
Division of the U.S. Justice Department under President Bill Clinton. Since 2015, he has served on the
board of directors of Global Blood Therapeutics, a biopharmaceutical company, and American Well
Corporation, a telemedicine company. Mr. Patrick also serves on the board of directors of Cerevel
Therapeutics Holdings, Inc., a biopharmaceutical company (since January 2021) and Toast Inc., a cloud-
based restaurant software company (since February 2021). He previously served on the board of
Environmental Impact Acquisition Corp., a special purpose acquisition company focused on sustainability
companies, from January 2021 to February 2022. Mr. Patrick holds an A.B. from Harvard College and a
J.D. from Harvard Law School.

Mr. Patrick was selected to serve on our board of directors because of his experience in the private

and public sector and as a director of publicly-held and privately-held companies.

Continuing Directors

Jeff Lawson. See the section titled “Executive Officers” for Mr. Lawson’s biographical information.

Richard Dalzell. Mr. Dalzell has served as a member of our board of directors since March 2014.
From 1997 to 2007, Mr. Dalzell served in several roles at Amazon.com, Inc., an e-commerce and cloud
computing company, including as Senior Vice President of Worldwide Architecture and Platform Software
and Chief Information Officer. From 1990 to 1997, Mr. Dalzell served in several roles at Wal-Mart Stores,
Inc., a discount retailer, including as Vice President of the Information Systems Division. Mr. Dalzell
currently serves on the board of directors of Intuit Inc. (since 2015), a software company. Mr. Dalzell
previously served on the board of directors of AOL Inc. Mr. Dalzell holds a B.S. in Engineering from the
United States Military Academy at West Point.

Mr. Dalzell was selected to serve on our board of directors because of his experience as an executive

and director of technology companies.

Byron Deeter. Mr. Deeter has served as a member of our board of directors since November 2010.
Since 2005, Mr. Deeter has served as a partner of Bessemer Venture Partners, a venture capital firm. From
2004 to 2005, Mr. Deeter served as a director at International Business Machines Corporation, or IBM, a
technology and consulting company. From 2000 to 2004, Mr. Deeter served in several roles at Trigo
Technologies, Inc., a product information management company, which was acquired by IBM in 2004,
including co-founder, President, Chief Executive Officer and Vice President of Business Development.
From 1998 to 2000, Mr. Deeter served as an Associate at TA Associates, a private equity firm. From 1996
to 1998, Mr. Deeter served as an Analyst at McKinsey & Company, a business consulting firm. Mr. Deeter
previously served on the board of directors of Cornerstone OnDemand, Inc., a talent management
software company, Instructure, Inc., an educational technology company, and SendGrid, Inc., an email
API platform company, which was acquired by us in 2019. Mr. Deeter holds a B.A. in Political Economy
from the University of California, Berkeley.

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Mr. Deeter was selected to serve on our board of directors because of his experience in the venture

capital industry and as a director of publicly-held and privately-held technology companies.

Jeff Epstein. Mr. Epstein has served as a member of our board of directors since July 2017.

Mr. Epstein is an Operating Partner at Bessemer Venture Partners, a venture capital firm, which he joined
in November 2011. Mr. Epstein served as chief financial officer of several public and private companies,
including Oracle, an enterprise software company, and DoubleClick, an Internet advertising company,
which was acquired by Google. Mr. Epstein serves on the board of directors of Poshmark, an online
fashion marketplace (since April 2018), Okta, a software services company (since May 2021), Couchbase, a
cloud database company (since 2015) and AvePoint, a data management company (since July 2021). He
previously served on the board of directors of Booking Holdings, an online travel company, from April
2003 to June 2019, Global Eagle Entertainment, an inflight communication company, from January 2013
to June 2018, and Shutterstruck, a photography marketplace, from April 2021 to June 2021. Mr. Epstein
holds a B.A. from Yale University and an M.B.A. from Stanford University.

Mr. Epstein was selected to serve on our board of directors because of his experience as an executive

and director of technology companies.

Jeffrey Immelt. Mr. Immelt has served as a member of our board of directors since June 2019.
Mr. Immelt is a venture partner of New Enterprise Associates (“NEA”), a venture capital firm, which he
joined in 2018. From 2001 to 2017, Mr. Immelt served as chairman and chief executive officer of General
Electric, a U.S. based multinational conglomerate. Prior to being appointed chief executive officer of
General Electric, Mr. Immelt held several global leadership roles at General Electric from 1982 to 2000 in
the Plastics, Appliances and Healthcare businesses. He was named one of the “World’s Best CEOs” by
Barron’s three times and currently serves on the board of certain NEA portfolio private companies, and is
a member of The American Academy of Arts & Sciences. He also has served as a director of Bloom
Energy Corporation, a clean energy company (since November 2019), Desktop Metal, Inc., a 3D printing
solutions company (since May 2018), Bright Health Group, Inc., a diversified healthcare services company
(since June 2021), Tuya Inc., an IoT cloud development platform (since March 2021), and Hennessy
Capital Investment Corp. V, a special purpose acquisition company focused on clean technology (since
January 2021). Mr. Immelt previously served as director of the Federal Reserve Bank of New York, a
government-organized financial and monetary policy organization, as chairman of the U.S. Presidential
Council on Jobs and Competitiveness and as a trustee of Dartmouth College. He holds a B.A in applied
mathematics from Dartmouth College and an M.B.A. from Harvard University.

Mr. Immelt was selected to serve on our board of directors because of his experience as a senior

executive of technology companies and as a director and chairman of publicly-held companies.

Erika Rottenberg. Ms. Rottenberg has served as a member of our board of directors since June 2016.

Since March 2022, Ms. Rottenberg serves as a Strategic Advisor at the Chan Zuckerberg Initiative, a
philanthropic initiative, after having served as its Vice President and General Counsel from 2018 to 2022.
From 2008 to 2014, Ms. Rottenberg served as Vice President, General Counsel and Secretary at LinkedIn
Corporation, a professional networking company. From 2004 to 2008, Ms. Rottenberg served as Senior
Vice President, General Counsel and Secretary at SumTotal Systems, Inc., a talent management enterprise
software company. From 1996 to 2002, Ms. Rottenberg served in several roles at Creative Labs, Inc., a
leading computer peripheral and digital entertainment product company, including as Vice President,
Strategic Development and General Counsel. From 1993 to 1996, Ms. Rottenberg served as an attorney at
Cooley LLP, a law firm. From 2015 to 2020, Ms. Rottenberg served on the board of directors of Nasdaq-
listed Wix.com Ltd., a cloud-based web development platform, and she currently serves on the boards of
Girl Scouts USA and the Silicon Valley Law Foundation. Ms. Rottenberg holds a B.S. in Special and
Elementary Education from the State University of New York at Geneseo and a J.D. from the University
of California, Berkeley, Boalt Hall School of Law.

Ms. Rottenberg was selected to serve on our board of directors because of her experience as a senior

executive of technology companies and as a director of publicly-held technology companies.

Director Independence

Our Class A common stock is listed on The New York Stock Exchange and the Long-Term Stock
Exchange. Under the NYSE Listing Standards and the LTSE Listing Standards, independent directors
must comprise a majority of a listed company’s board of directors. In addition, the NYSE Listing
Standards and LTSE Listing Standards require that, subject to specified exceptions, each member of a
listed company’s audit, compensation and nominating and corporate governance committees be
independent. Under the NYSE Listing Standards and LTSE Listing Standards, a director will only qualify
as an “independent director” if, in the opinion of that listed company’s board of directors, that director
does not have a relationship that would interfere with the exercise of independent judgment in carrying out
the responsibilities of a director.

Audit committee members must also satisfy the additional independence criteria set forth in
Rule 10A-3 under the Exchange Act, the NYSE Listing Standards and the LTSE Rules. Compensation
and talent management committee members must also satisfy the additional independence criteria set
forth in Rule 10C-1 under the Exchange Act, the NYSE Listing Standards and the LTSE Listing
Standards.

Our board of directors has undertaken a review of the independence of each director. Based on
information provided by each director concerning his or her background, employment and affiliations, our
board of directors has determined that Messrs. Dalzell, Deeter, Epstein, Immelt and Patrick, and Mses.
Dubinsky and Rottenberg do not have a relationship that would interfere with the exercise of independent
judgment in carrying out the responsibilities of a director and that each of these directors is “independent”
as that term is defined under the NYSE Listing Standards and LTSE Listing Standards. In making these
determinations, our board of directors considered the current and prior relationships that each
non-employee director has with our Company and all other facts and circumstances our board of directors
deemed relevant in determining their independence, including the beneficial ownership of our capital
stock by each non-employee director, and the transactions involving them described in the section titled
“Certain Relationships and Related Party Transactions.”

Board Leadership Structure

Chairperson of the Board

Mr. Lawson, our co-founder and Chief Executive Officer, also serves as Chairperson of our board of

directors. As our co-founder and Chief Executive Officer, Mr. Lawson possesses detailed and in-depth
knowledge of the issues, opportunities and challenges facing the company and its business and is best
positioned to identify strategic priorities, lead critical discussions and execute our business plans. We
believe this extensive company-specific experience and expertise of Mr. Lawson, together with the outside
experience, oversight and expertise of our independent directors, allows for differing perspectives and
roles regarding strategy development that benefit our stockholders.

Lead Independent Director

Our board has a strong and empowered lead independent director who provides an effective
independent voice in our leadership structure. Since Mr. Lawson is the Chairperson of our board of
directors and is not an “independent” director pursuant to the NYSE Listing Standards and LTSE Listing
Standards, we appointed Mr. Jeff Epstein to serve as our lead independent director in December 2017.
Mr. Epstein serves as a liaison between our Chief Executive Officer and Chairperson, and our independent
directors, and performs such additional duties as our board of directors may otherwise determine and
delegate. In addition, our independent directors, who are the sole members of each of our board

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committees, provide strong independent leadership and oversight for each of these committees. Our
independent directors generally meet in executive session after each meeting of the board of directors. At
each such meeting, the presiding director for each executive session of our board of directors will be either
(i) the lead independent director or (ii) chosen by the independent directors.

Our board believes that this leadership structure, coupled with a strong emphasis on board

independence, provides effective independent oversight of management while allowing both the board of
directors and management to benefit from Mr. Lawson’s leadership and years of experience in the
company’s business and the technology industry.

We believe that the structure of our board of directors and committees of our board of directors
provides effective independent oversight of management, while Mr. Lawson’s combined role enables
strong leadership, creates clear accountability and enhances our ability to develop and execute our strategy
and communicate our message clearly and consistently to stockholders.

Board Meetings and Committees

Our board of directors may establish the authorized number of directors from time to time by

resolution. Our board of directors currently consists of eight members.

During our fiscal year ended December 31, 2021, our board of directors held six meetings (including

regularly scheduled and special meetings), and each director attended at least 75% of the aggregate of
(i) the total number of meetings of our board of directors held during the period for which he or she had
been a director and (ii) the total number of meetings held by all committees of our board of directors on
which he or she served during the periods that he or she served.

Although our Corporate Governance Guidelines do not have a formal policy regarding attendance by

members of our board of directors at annual meetings of stockholders, we encourage, but do not require,
our directors to attend. All members of our board of directors then serving in such capacity, other than
Mr. Epstein, attended our 2021 annual meeting of stockholders.

Our board of directors has established an audit committee, a compensation and talent management
committee and a nominating and corporate governance committee. The composition and responsibilities
of each of the committees of our board of directors is described below. Members serve on these
committees until their resignation or until as otherwise determined by our board of directors.

Audit Committee

Our audit committee consists of Mr. Epstein and Mses. Dubinsky and Rottenberg, with Mr. Epstein
serving as Chairperson. Each member of our audit committee meets the requirements for independence
under the NYSE Listing Standards, LTSE Listing Standards and SEC rules. Each member of our audit
committee also meets the financial literacy and sophistication requirements of the NYSE Listing Standards
and LTSE Listing Standards. In addition, our board of directors has determined that each of Mr. Epstein
and Ms. Dubinsky is an audit committee financial expert within the meaning of Item 407(d) of Regulation
S-K under the Securities Act of 1933, as amended (the “Securities Act”).

No member of our audit committee may simultaneously serve on the audit committee of more than

three public companies unless our board of directors determines that such simultaneous service would not
impair the ability of such member to effectively serve on our audit committee. Mr. Epstein currently serves
on the audit committees of three other public companies. Given Mr. Epstein’s extensive experience as a
Chief Financial Officer, his proficiency in accounting, and his knowledge of our Company, our board has
determined that Mr. Epstein’s simultaneous service on the audit committees of more than three public
companies does not impair his ability to effectively serve on our audit committee. Mr. Epstein attended
100% of the meetings held by our audit committee and board of directors during fiscal year 2021.

Our audit committee, among other things:

• selects a qualified firm to serve as the independent registered public accounting firm to audit our

financial statements;

• helps to ensure the independence and performance of the independent registered public accounting

firm;

• discusses the scope and results of the audit with the independent registered public accounting firm,
and reviews, with management and the independent registered public accounting firm, our interim
and year-end results of operations;

• develops procedures for employees to submit concerns anonymously about questionable accounting

or audit matters;

• reviews our policies on risk assessment and risk management;

• reviews related party transactions; and

• approves or, as required, pre-approves, all audit and all permissible non-audit services, other than
de minimis non-audit services, to be performed by the independent registered public accounting
firm.

Our audit committee operates under a written charter that satisfies the applicable rules and
regulations of the SEC, the NYSE Listing Standards and the LTSE Listing Standards. A copy of the
charter of our audit committee is available on our website at https://investors.twilio.com.

Our audit committee held nine meetings during fiscal year 2021.

Compensation and Talent Management Committee

Our compensation and talent management committee consists of Messrs. Immelt and Patrick (and
Mr. Dalzell, for a portion of 2021 and Ms. Donio until her resignation, effective April 29, 2022). Ms. Donio
served as Chairperson of our compensation and talent management committee during 2021. Mr. Immelt
succeeded Ms. Donio as Chairperson effective April 29, 2022 in connection with Ms. Donio’s resignation
from our board of directors and compensation and talent management committee. Each member of our
compensation and talent management committee meets the requirements for independence under the
NYSE Listing Standards, LTSE Listing Standards and SEC rules. Each member of our compensation and
talent management committee is also a non-employee director, as defined pursuant to Rule 16b-3
promulgated under the Exchange Act (“Rule 16b-3”). During fiscal year 2021, Mr. Dalzell also served on
the compensation and talent management committee and resigned from the compensation and talent
management committee effective April 1, 2021. Mr. Dalzell met the requirements for independence under
the NYSE Listing Standards, LTSE Listing Standards and SEC rules, and he is a non-employee director, as
defined pursuant to Rule 16b-3. Our compensation and talent management committee, among other
things:

• reviews, determines, and approves, or makes recommendations to our board of directors regarding,

the compensation of our executive officers;

• administers our stock and equity compensation plans;

• reviews and approves, or makes recommendations to our board of directors, regarding incentive

compensation and equity compensation plans;

• establishes and reviews general policies relating to compensation and benefits of our employees;

and

• reviews and discusses with management our human capital management activities, including, among
other things, matters relating to talent management and development, talent acquisition, employee
engagement and diversity, equity and inclusion.

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Our compensation and talent management committee operates under a written charter that satisfies
the applicable rules of the SEC, the NYSE Listing Standards and the LTSE Listing Standards. A copy of
the charter of our compensation and talent management committee is available on our website at https://
investors.twilio.com.

Our compensation and talent management committee held six meetings during fiscal year 2021.

Nominating and Corporate Governance Committee

Our nominating and corporate governance committee consists of Ms. Rottenberg and Messrs. Dalzell
and Deeter, with Ms. Rottenberg serving as Chairperson. Each member of our nominating and governance
committee meets the requirements for independence under the NYSE Listing Standards, LTSE Listing
Standards and SEC rules. Our nominating and corporate governance committee, among other things:

• identifies, evaluates and selects, or makes recommendations to our board of directors regarding,

nominees for election to our board of directors and its committees;

• considers and makes recommendations to our board of directors regarding the composition of our

board of directors and its committees;

• reviews and assesses the adequacy of our corporate governance guidelines and policies and

practices and recommends any proposed changes to our board of directors;

• oversees and periodically reviews our environmental, social and governance activities and programs;

and

• evaluates the performance of our board of directors and of individual directors.

Our nominating and corporate governance committee operates under a written charter that satisfies

the applicable NYSE Listing Standards and the LTSE Listing Standards. A copy of the charter of our
nominating and corporate governance committee is available on our website at https://investors.twilio.com.

Our nominating and corporate governance committee held four meetings during fiscal year 2021.

Compensation and Talent Management Committee Interlocks and Insider Participation

During 2021, Ms. Donio and Messrs. Dalzell (with respect to Mr. Dalzell, for a portion of the year),
Immelt and Patrick served on the compensation and talent management committee. Effective April 29,
2022, Ms. Donio resigned from our board of directors and compensation and talent management
committee. None of the members of our compensation and talent management committee is or has been
an officer or employee of our Company. None of our executive officers currently serves, or in the past year
has served, as a member of the board of directors or compensation and talent management committee (or
other board committee performing equivalent functions) of any entity that has one or more of its executive
officers serving on our board of directors or compensation and talent management committee. See the
section titled “Certain Relationships and Related Party Transactions” for information about related party
transactions involving members of our compensation and talent management committee or their affiliates.

Identifying and Evaluating Director Nominees

The board of directors has delegated to the nominating and corporate governance committee the

responsibility of identifying suitable candidates for nomination to the board of directors (including
candidates to fill any vacancies that may occur) and assessing their qualifications in light of the policies and
principles in our corporate governance guidelines and the committee’s charter. The nominating and
corporate governance committee may gather information about the candidates through interviews,
detailed questionnaires, comprehensive background checks or any other means that the nominating and
corporate governance committee deems to be appropriate in the evaluation process. The nominating and
corporate governance committee then meets as a group to discuss and evaluate the qualities and skills of
each candidate, both on an individual basis and taking into account the overall composition and needs of

the board of directors. Based on the results of the evaluation process, the nominating and corporate
governance committee recommends candidates for the board of directors’ approval as director nominees
for election to the board of directors.

Minimum Qualifications and Membership on other Boards

Twilio has a highly effective and engaged board of directors, and members of our board of directors

are expected to prepare for, attend, and participate in all board of directors and applicable committee
meetings and are encouraged to attend our annual meetings of stockholders. The board of directors does
not believe that explicit limits on the number of other boards of directors on which the directors may serve,
or on other activities the directors may pursue, are appropriate. Rather, we believe that our directors’
service on other companies’ boards enables them to contribute valuable knowledge and perspective to our
board of directors. Nonetheless, the board of directors recognizes that carrying out the duties of a director
requires a significant commitment of time and attention, and excessive time commitments - whether other
board service or otherwise—may interfere with the ability to fulfill Twilio board of director responsibilities.
Our Corporate Governance Guidelines require directors to notify the chairperson of the nominating and
corporate governance committee in connection with joining another board and regularly update the
company regarding other directorship and significant other commitments, so that the potential for conflicts
or other factors that may compromise a director’s ability to perform their duties may be fully assessed.

Our board of directors has delegated to our nominating and corporate governance committee the

responsibility of identifying suitable candidates for nomination to our board of directors (including
candidates to fill any vacancies that may occur) and assessing their qualifications in light of the policies and
principles in our Corporate Governance Guidelines and the committee’s charter. Our nominating and
corporate governance committee uses a variety of methods for identifying and evaluating director
nominees and considers all facts and circumstances that it deems appropriate or advisable. In its
identification and evaluation of director candidates, our nominating and corporate governance committee
considers the current size and composition of our board of directors and the needs of our board of
directors and the respective committees of our board of directors. Some of the qualifications that our
nominating and corporate governance committee considers include:

• integrity, judgment and adherence to high personal ethics and character;

• demonstrated achievement and competence in their fields, business acumen, understanding of our
business and industry, the ability to offer advice and guidance to our management team, the ability
to make significant contributions to our success, and an understanding of the fiduciary
responsibilities that are required of a director;

• diversity, including in breadth and quality of experience, personal and professional experience,
expertise, culture, race, ethnicity, gender and sexual orientation, including lived experience;

• skills, education and expertise;

• independence and potential conflicts of interest; and

• the scope and breadth of other commitments.

In addition to the above criteria, and although there are no further stated minimum criteria for
director nominees, although our nominating and corporate governance committee may also consider such
other factors as it may deem, from time to time, are in our and our stockholders’ best interests.

Our nominating and corporate governance committee reviews the totality of the circumstances of
each nominee and each board member to assess the ability of such individuals to devote the requisite time
to fulfilling the responsibilities of service on our board of directors and applicable committees. Our
nominating and corporate governance committee evaluates many factors when assessing the effectiveness
and active involvement of each director, including the director’s attendance at board and committee

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meetings, participation and level of engagement during these meetings, the role played by the director on
our board of directors, as well as on the other boards, including committee membership and chairperson
designation, and the experience and expertise of the director, including both relevant industry experience
and service on other public company boards, which enable the director to serve on multiple boards
effectively.

Although our board of directors does not maintain a specific policy with respect to the number of

diverse individuals on our board of directors, our board of directors believes that our board of directors
should be a diverse body, and our nominating and corporate governance committee endeavors to consider
candidates who represent a mix of backgrounds including breadth and quality of experience, personal and
professional experience, expertise, culture, race, ethnicity, gender and sexual orientation, including lived
experience. In making determinations regarding nominations of directors, our nominating and corporate
governance committee takes into account the benefits of diverse viewpoints. Our nominating and
corporate governance committee also considers these and other factors as it oversees the annual board of
directors and committee evaluations. After completing its review and evaluation of director candidates,
our nominating and corporate governance committee recommends to our full board of directors the
director nominees for selection.

Stockholder Recommendations and Nominations to the Board of Directors

Stockholders may submit recommendations for director candidates to the nominating and corporate

governance committee by sending the individual’s name and qualifications to our Chief Legal Officer at
Twilio Inc., 101 Spear Street, First Floor, San Francisco, California 94105, who will forward all
recommendations to the nominating and corporate governance committee. The nominating and corporate
governance committee will evaluate any candidates recommended by stockholders against the same
criteria and pursuant to the same policies and procedures applicable to the evaluation of candidates
proposed by directors or management.

Stockholder and Other Interested Party Communications

The board of directors provides to every stockholder and any other interested parties the ability to

communicate with the board of directors, as a whole, and with individual directors on the board of
directors through an established process for stockholder communication. For a stockholder
communication directed to the board of directors as a whole, stockholders and other interested parties
may send such communication to our Chief Legal Officer via U.S. Mail or Expedited Delivery Service to:
Twilio Inc., 101 Spear Street, First Floor, San Francisco, California 94105, Attn: Board of Directors c/o
Chief Legal Officer.

For a stockholder or other interested party communication directed to an individual director in his or

her capacity as a member of the board of directors, stockholders and other interested parties may send
such communication to the attention of the individual director via U.S. Mail or Expedited Delivery Service
to: Twilio Inc., 101 Spear Street, First Floor, San Francisco, California 94105, Attn: [Name of Individual
Director].

We encourage stockholders to e-mail any such communications to us at legalnotices@twilio.com to

help ensure prompt receipt. Our Chief Legal Officer, in consultation with appropriate members of our
board of directors as necessary, will review all incoming communications and, if appropriate, all such
communications will be forwarded to the appropriate member or members of our board of directors, or if
none is specified, to the Chairperson of our board of directors.

Corporate Governance Guidelines and Code of Conduct

Our board of directors has adopted Corporate Governance Guidelines that address items such as the

qualifications and responsibilities of our directors and director candidates and corporate governance
policies and standards applicable to us in general. In addition, our board of directors has adopted a code of

conduct that applies to all of our employees, officers and directors, including our Chief Executive Officer,
Chief Financial Officer, Chief Operating Officer and other executive and senior financial officers. A copy
of our Corporate Governance Guidelines and Code of Conduct is available on our Internet website at
https://investors.twilio.com and may also be obtained without charge by contacting our Corporate
Secretary at Twilio Inc., 101 Spear Street, First Floor, San Francisco, California 94105. We intend to
disclose any amendments to our Code of Conduct, or waivers of its requirements, on our website or in
filings under the Exchange Act, as required by the applicable rules and exchange requirements. During
fiscal year 2021, no waivers were granted from any provision of our Code of Conduct.

Our Commitment to Environmental, Social and Governance Matters

At Twilio, we recognize the impact that a business can have on its surrounding community and

environment, and we believe that an organization has the responsibility to be a good corporate citizen. We
also value our employees and recognize the critical roles that they play in the achievement of our long-
term goals and overall success. The following is intended as a summary of some of the steps we are taking
to create a safe and inclusive workplace for our employees and to foster positive impact in our
communities and for our stakeholders. More information about our environmental, social and governance
efforts can be found in our 2021 Impact and DEI Report, available on the Governance section of our
website at https://investors.twilio.com. Information referenced on our website does not constitute part of
this proxy statement.

Board Oversight

We are committed to sound governance and oversight of our impact on the surrounding community
and environment. This is one of the reasons that our board of directors has delegated formal oversight of
our environmental, social and governance activities, programs and disclosure to our nominating and
corporate governance committee. At each regularly scheduled meeting of our nominating and corporate
governance committee, members of the Company’s management provide our nominating and corporate
governance committee with formal updates on the Company’s environmental, social and governance
activities and programs.

Environmental

We recognize the impact that companies can have on the environment and we are working to

integrate sustainability initiatives into our business practices, including the evaluation of energy
conservation initiatives and renewable energy purchases that can help reduce greenhouse emissions at our
facilities. Our goal is to limit our impact on climate change and to carry out our business activities in a
sustainable manner. As a business that is conducted largely online, our carbon footprint may be smaller
than those of manufacturing or other businesses, but we still strive to limit our impact on climate change.
We have also begun to measure our carbon footprint with the goal of setting a greenhouse gas reduction
target in the future. Additionally, we are monitoring our water usage and creating a systematic global
approach to responsibly dispose of our electronic waste, including through participation in vendor
buy-back programs or e-cycling. Finally, we are fostering the promotion of conservation by recycling,
composting, and source reduction in all of our offices globally.

Social Impact of Product Portfolio

Twilio’s mission is to unleash the imagination of builders. As a company, we’ve long been inspired by

the imagination of builders tackling complex social problems. We started Twilio.org to be the engine
behind social impact organizations, helping them use our digital engagement tools and financial resources
to supercharge their reach and scale their impact. We partner with nonprofits, social enterprises,
international NGOs, and local governments that deliver support in a crisis, connect people with life-
changing resources, and inspire action for the greater good. Whether it’s fueling the technology behind
crisis hotlines, building video applications that connect teachers and students for distance learning, or

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using our voice and SMS products to organize underrepresented communities to vote, our social impact
partners are engaging people around the world to build the future that they want. In 2021, impact
organizations leveraged Twilio to reach over 500 million people.

Effective communication is critical in helping social impact organizations listen and engage with the

people that they serve. That’s why we sell our communication products at a discount to these types of
organizations. We then reinvest the profit back into our social initiatives. This means as our revenues grow,
so does our social impact. This increased revenue translates to more grants, employee volunteering, and
technical resources available for organizations using technology to advance their missions.

Community Involvement and Philanthropy

One form of employee volunteering is the WePledge 1% program that Twilio.org launched in 2019.
WePledge 1% is our volunteer impact and giving program in which employees voluntarily pledge to give
1% of their own time, income, or equity (or a combination) to causes that resonate with them. Since the
program’s launch in September 2019, over 3,400 of our employees have taken the pledge to commit 1%,
resulting in the donation of over three million dollars and over 20,000 volunteer hours.

As the scale and frequency of global crises increase, social impact organizations are innovating to

serve their communities and treat people as individuals with dignity. Our goal at Twilio.org is to unleash
our product, people, and capital to support 1 billion people annually. We know that when organizations
pair their local, first-hand expertise with the scale of technology, more people around the world have the
opportunity to thrive.

In 2015, we reserved 1% of our Class A common stock to fund our social impact at Twilio.org. In
March 2019, we increased the Twilio.org share reserve by 203,658 shares of Class A common stock to
account for a similar program previously operated by SendGrid, Inc. (one of our wholly owned
subsidiaries, which we acquired in February 2019). Since 2016, Twilio.org has given approximately
$124 million in product credits, donations, grants and investments, consistent with its philanthropic goals.

Compliance & Ethics

Our culture of integrity starts with our Corporate Governance Guidelines and Code of Conduct, and

includes efforts in risk assessment, development of policies, procedures, training, auditing, monitoring,
investigations, and remediation of potential compliance matters. We have also implemented mandatory
anti-harassment, anti-corruption and anti-bribery training as well as more targeted compliance training
aimed at addressing the compliance risks of specific roles and business functions.

Furthermore, in order to promote a high standard of ethical and professional conduct within our
Company, we have engaged with an impartial third party to administer an ethics reporting hotline where,
as permitted by law, employees, contractors, customers and vendors may address any issues on a
confidential and anonymous basis. Employees may choose the method with which they are most
comfortable to discuss any issues or complaints, whether it is through their manager, our human resources
partners, or the reporting hotline. In addition, our Code of Conduct applies to all of our employees,
including our officers and board of directors. Violations of the Code of Conduct may result in disciplinary
action, up to and including termination of employment.

Customer Protection and Data Privacy

We are committed to protecting the privacy and data of our developer ecosystem, customers and

users. We have implemented policies and procedures that facilitate compliance with applicable privacy
laws, including the California Consumer Privacy Act and the General Data Protection Regulation
(“GDPR”), and work to use privacy by design in our review and building processes. For example, in 2016,
even before GDPR became effective, we started the process of putting in place our own Binding
Corporate Rules (“BCRs”)—considered one of the highest global standards for data protection that a

company can have. Our BCRs codify our guiding principles and approach to compliance with data
protection laws when processing personal information.

In addition to working to maintain data privacy and security, we have proactively taken steps to
provide increased visibility to the Twilio community around government requests received for customer
information by municipal, state, provincial and federal governments globally. We do this by publishing
semi-annual transparency reports. Our transparency reports document the total volume of government
requests for information received by us, how we responded to the requests, and how often we notified
users of the requests.

Data Security

Furthermore, we train employees on policies and procedures for secure data handling and use

physical and procedural safeguards to help keep our facilities and equipment secure. All of our employees
and contractors are required to complete privacy and security training every year.

Diversity & Inclusion

At Twilio, we are driving a diversity, equity and inclusion (“DEI”) strategy based on the principles of

antiracism. We believe that we can effectively promote equity in the workplace when we focus on
transformational change at the individual and leadership levels. By educating and empowering Twilions to
think and operate through an antiracist lens, we’ll be able to build a more diverse workforce, promote
equity for all communities in the workplace and foster safe, inclusive environments. Twilio publishes its
gender and ethnic diversity data in its Impact and DEI Report, which is available on the Governance
section of our website at https://investors.twilio.com.

In 2020 we created our first set of company-wide racial justice and equity business priorities and
measures, and we have since began the work to embed and operationalize antiracism across the business,
with a strong focus on education. In 2021, 100% of our executive team participated in two antiracism
workshops and 86% of VPs and above participated in an in-depth antiracism workshop, with continued
learning planned for more Twilions in 2022. We expanded our partnerships with global organizations to help
us find, grow, and keep diverse talent in various demographics, regions, and countries. Lastly, 50% of
employee resource group (“ERG”) specific programming and events promoted antiracist learning in the
workplace.

We will continue to grow our DEI resources and global footprint to make sure our antiracism strategy
scales along with the business. Most recently, we expanded the DEI team and launched new ERG chapters
globally to ensure we are translating antiracism and amplifying DEI efforts across all teams and regions.

Risk Management

Risk is inherent with every business, and we face a number of risks, including strategic, financial,
business and operational, cyber security, legal and compliance, and reputational. We have designed and
implemented processes to manage risk in our operations. Management is responsible for the day-to-day
management of risks the Company faces, while our board of directors, as a whole and assisted by its
committees, has responsibility for the oversight of risk management. In addition, every employee is
required to complete data privacy, cybersecurity and code of conduct training upon joining the Company
and each year thereafter. In its risk oversight role, our board of directors has the responsibility to satisfy
itself that the risk management processes designed and implemented by management are appropriate and
functioning as designed.

Our board of directors believes that open communication between management and our board of

directors is essential for effective risk management and oversight. Our board of directors meets with our
Chief Executive Officer and other members of the senior management team at quarterly meetings of our
board of directors, where, among other topics, they discuss strategy and risks facing the Company, as well
as such other times as they deem appropriate.

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While our board of directors is ultimately responsible for risk oversight, our board committees assist

our board of directors in fulfilling its oversight responsibilities in certain areas of risk. Our audit committee
assists our board of directors in fulfilling its oversight responsibilities with respect to risk management in
the areas of internal control over financial reporting and disclosure controls and procedures, cybersecurity
and security, legal and regulatory compliance, and discusses with management and the independent
auditor guidelines and policies with respect to risk assessment and risk management. On a quarterly basis,
members of our management team update the audit committee on the status of key risks impacting the
Company. Our audit committee also reviews our major financial risk exposures and the steps management
has taken to monitor and control these exposures. Our audit committee also monitors certain key risks on
a regular basis throughout the fiscal year, such as risk associated with internal control over financial
reporting and liquidity risk. Our nominating and corporate governance committee assists our board of
directors in fulfilling its oversight responsibilities with respect to the management of risk associated with
board organization, membership and structure, and corporate governance. Our compensation and talent
management committee assesses risks created by the incentives inherent in our compensation programs,
policies and practices and those related to human capital management issues. Finally, our full board of
directors reviews strategic and operational risk in the context of reports from the management team,
receives reports on all significant committee activities at each regular meeting, and evaluates the risks
inherent in significant transactions.

Non-Employee Director Compensation

Non-Employee Director Compensation Policy

We have adopted a compensation policy for our non-employee directors (as amended and restated

from time to time, the “Non-Employee Director Compensation Policy”) to attract, retain and award these
individuals and align their long-term interests with those of the Company and our stockholders. Our
non-employee directors are paid in the form of restricted stock units (“RSUs”) only and do not receive
cash compensation. Employee directors receive no additional compensation for their service as a director.

Decisions regarding the Non-Employee Director Compensation Policy are approved by our board of

directors based on recommendations from our compensation and talent management committee. Our
compensation and talent management committee conducts an annual evaluation of the design and
competitiveness of our Non-Employee Director Compensation Policy in light of best practices, market
trends and a competitive market analysis of data for the Company’s compensation peer group prepared by
its compensation consultant, and makes appropriate recommendations to our board of directors with
respect to the compensation of our non-employee directors.

During 2021, our compensation and talent management committee engaged Compensia, Inc.
(“Compensia”), a national compensation consulting firm, as its compensation consultant to advise on,
among other things, non-employee director compensation matters. In doing so, our compensation and
talent management committee reviewed and considered a peer group compensation data analysis prepared
by Compensia. Our compensation and talent management committee targeted non-employee director
compensation, to consist solely of RSUs, to the 50th percentile relative to our peers. In May 2021, upon the
recommendation of the compensation and talent management committee, our board of directors approved
the following changes to our Non-Employee Director Compensation Policy for fiscal 2021: (i) increase the
annual equity retainer for the lead independent director from $20,000 to $23,000; (ii) increase the annual
equity retainer for members of the audit committee (other than the chairperson) from $11,000 to $13,000;
(iii) increase the annual equity retainer for the audit committee chairperson from $22,000 to $26,000; (iv)
increase the annual equity retainer for members of the compensation and talent management committee
(other than the chairperson) from $9,000 to $10,000; (v) increase the annual equity retainer for the
compensation and talent management committee chairperson from $18,000 to $20,000; (vi) increase the
annual equity retainer for members of the nominating and corporate governance committee (other than
the chairperson) from $5,000 to $6,000 (vii) increase the annual equity retainer for the nominating and

corporate governance committee chairperson from $10,000 to $12,000; (viii) increase the Initial Equity
Grant (as defined below) from $440,000 to $575,000; and (ix) pay all annual retainers for board
membership, lead independent director and committee membership in the form of RSUs in lieu of cash
compensation.

For purposes of the amounts described in this section, the values are calculated as set forth in the

Non-Employee Director Compensation Policy. For the aggregate grant date fair value of the RSUs
awarded to the non-employee directors in the fiscal year ended December 31, 2021, calculated in
accordance with FASB ASC Topic 718, please see “2021 Non-Employee Director Compensation Table”
below.

Annual Equity Retainers

For fiscal 2021, our non-employee directors received compensation in the form of RSUs only, the

values of which are as set forth below.

Annual Equity Retainer for Board Membership

Annual service on the board of directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Additional Annual Equity Retainer for Lead Independent Director . . . . . . . . . . . . . . . . . . . . . . . . .
Additional Annual Equity Retainer for Committee Membership

Annual service as member of the audit committee (other than chairperson) . . . . . . . . . . . . . . . .
Annual service as chairperson of the audit committee . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Annual service as member of the compensation and talent management committee (other

than chairperson) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Annual service as chairperson of the compensation and talent management committee . . . . . .
Annual service as member of the nominating and corporate governance committee (other

$40,000
$23,000

$13,000
$26,000

$10,000
$20,000

than chairperson) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Annual service as chairperson of the nominating and corporate governance committee . . . . . . .

$ 6,000
$12,000

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Annual Equity Grants

In addition, on the date of our annual meeting of stockholders, each non-employee director who
continued as a member of our board of directors following such annual meeting of stockholders received a
grant of RSUs having a value of $250,000 (the “Annual Equity Grant”).

During fiscal year 2021, the number of RSUs for the Annual Equity Grant was determined by dividing
the applicable values by the average closing market price on The New York Stock Exchange (or such other
market on which the Company’s Class A common stock is then principally listed) of one share of the
Company’s Class A common stock over the trailing 30-day period ending five business days before the
effective date of the grant.

The Annual Equity Retainer and Annual Equity Grants are granted in four quarterly installments
over the course of the year that commences on the date of each annual meeting of stockholders, with such
grants to be made on each September 15, December 15, March 15, and the earlier of (i) June 15 or (ii) the
day that is immediately prior to the next subsequent annual meeting of stockholders (each such date, a
“Quarterly Date,” and each such grant, a “Quarterly Grant”). The value of each Quarterly Grant shall be
equal to the value of the portion of the Annual Equity Retainer and Annual Equity Grants applicable to
the period beginning on the day after the immediately preceding Quarterly Date and ending on the then-
current Quarterly Date (the “Quarterly Period”), based on the board and committee roles held by the
non-employee director during such Quarterly Period. Each Quarterly Grant shall be fully vested upon the
date of grant.

Initial Equity Grants

Our Non-Employee Director Compensation Policy during fiscal year 2021 provided that, upon initial
election to our board of directors, each non-employee director would be granted RSUs having a value of
$575,000 (the “Initial Equity Grant”). The Initial Equity Grant vests in equal annual installments over
three years, subject to continued service as a director through the applicable vesting dates; provided,
however, that if a non-employee director is elected on a date other than at the annual meeting of
stockholders, one-third (1/3rd) of such value shall be pro-rated by the amount of time between such
election and the next annual meeting of stockholders and such pro-rated portion shall vest on the day prior
to the next annual meeting of stockholders, with the other two-thirds (2/3rds) vesting annually over the
following two years following such initial vesting date.

During fiscal year 2021, the number of RSUs for the Initial Equity Grant was determined by dividing
the applicable value by the average closing market price on The New York Stock Exchange (or such other
market on which the Company’s Class A common stock is then principally listed) of one share of the
Company’s Class A common stock over the trailing 30-day period ending five business days before the
effective date of the grant.

Awards granted under our Non-Employee Director Compensation Policy are subject to full
accelerated vesting upon a “sale event,” as defined in our 2016 Stock Option and Incentive Plan (as
amended and restated, the “2016 Plan”).

Our Non-Employee Director Compensation Policy also provides that, pursuant to the 2016 Plan, the
aggregate amount of compensation, including both equity compensation and cash compensation, paid to
any non-employee director in a calendar year will not exceed $750,000 (or such other limit as may be set
forth in the 2016 Plan or any similar provision of a successor plan).

We also reimburse all reasonable out-of-pocket expenses incurred by our non-employee directors for

their attendance at meetings of our board of directors or any committee thereof.

Changes to Non-Employee Director Compensation effective for Fiscal 2022

Following a review with Compensia of peer company board compensation trends in March 2022, our

compensation and talent management committee recommended, and our board of directors approved, the
following changes to our non-employee director compensation effective fiscal 2022, targeting
non-employee director compensation to the 50th percentile relative to our peers: (i) increase the annual
equity retainer for the lead independent director from $23,000 to $30,000 and (ii) increase the annual
equity retainer for all non-employee members of the board of directors from $40,000 to $45,000.

Non-Employee Directors’ Deferred Compensation Program

In July 2017, we implemented a Non-Employee Directors’ Deferred Compensation Program to offer

our non-employee directors the ability to defer the receipt of any RSUs granted to them from Initial
Grants or Annual Grants under the 2016 Plan. In advance of an award of RSUs and in compliance with
the program’s requirements, a non-employee director may elect to defer the receipt of all of his or her
RSUs until the earliest of (i) 90 days after such non-employee director ceases to serve as a member of our
board of directors; (ii) the consummation of a “sale event”; or (iii) 90 days after the non-employee
director’s death (such earliest date, the “Payment Event”). Upon the vesting of the RSUs, any amounts
that would otherwise have been paid in shares of Company common stock will be converted into deferred
stock units (“DSUs”) on a one-to-one basis and credited to the non-employee director’s deferral account.
The DSUs will be paid in shares of Company Class A common stock on a one-to-one basis in a single lump
sum (and will cease to be held in the non-employee director’s deferred account) as soon as practicable
following the Payment Event.

Death Equity Acceleration Policy

See “Executive Compensation—Other Compensation Policies and Practices—Death Equity

Acceleration Policy” for a discussion of the treatment of equity awards upon the termination due to death
of an employee’s or non-employee director’s employment or other service relationship with the Company
or any of its subsidiaries.

Stock Ownership Policy

In April 2018, we adopted a stock ownership policy for our non-employee directors, which was

amended and restated in September 2020 and March 2022. Our stock ownership policy, as amended,
requires our non-employee directors to acquire and hold a number of shares of our Company’s common
stock equal in value to five times (increased from four times in March 2022) the director’s annual retainer
for regular service on the board of directors. We only count directly and beneficially owned shares,
including shares purchased through our Company’s 2016 Employee Stock Purchase Plan (as amended and
restated, the “ESPP”) or Section 401(k) plan, if applicable, and shares underlying vested RSUs that are
held or deferred. We do not count shares underlying vested and unexercised in-the-money stock options.
Each non-employee director has five years from the later of his or her initial election to the board of
directors or from the effective date of the policy to attain the required ownership level.

2021 Non-Employee Director Compensation Table

The following table provides information regarding the total compensation that was earned by or paid

to each of our non-employee directors in fiscal year 2021, all of which were paid solely in RSUs.
Mr. Lawson, who is our Chief Executive Officer, did not receive any additional compensation for his
service as a director. The compensation received by Mr. Lawson, as a named executive officer, is presented
in “Executive Compensation—Summary Compensation Table.”

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Name

Stock awards ($)(1)

Total ($)

Richard Dalzell(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Byron Deeter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Elena Donio(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Donna Dubinsky . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Jeff Epstein(4)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Jeffrey Immelt(5)
Deval Patrick(6)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Erika Rottenberg . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

138,928
138,928
145,751
142,470
159,135
140,659
714,521
147,824

(1) Unless otherwise indicated, stock awards consist solely of RSUs which vest immediately
upon grant. The amounts reported in this column represent the aggregate grant date fair
value of the RSUs awarded to the non-employee directors in the fiscal year ended
December 31, 2021, calculated in accordance with FASB ASC Topic 718. Such aggregate
grant date fair values do not take into account any estimated forfeitures related to service-
vesting conditions. The valuation assumptions used in determining such amounts are
described in the Notes to our Consolidated Financial Statements included in our Annual
Report on Form 10-K filed with the SEC on February 22, 2022. The amounts reported in
this column reflect the accounting cost for the RSUs and do not correspond to the actual
economic value that may be received by the non-employee directors upon vesting or
settlement of the RSUs.

(2) As of December 31, 2021, Mr. Dalzell held an outstanding option to purchase a total of

76,500 shares of our Class B common stock.

(3) Ms. Donio resigned from our board of directors, effective April 29, 2022.

(4) Mr. Epstein has elected to defer 18,794 RSUs pursuant to the Non-Employee Director’s
Deferred Compensation Program, which were converted into DSUs. As of December 31,
2021, Mr. Epstein held 18,794 DSUs.

(5) As of December 31, 2021, Mr. Immelt held 1,043 RSUs, which will vest on June 19, 2022 so

long as Mr. Immelt is a member of our board of directors on such date.

(6) As of December 31, 2021, Mr. Patrick held (i) 422 RSUs, which vested on January 13, 2022,
(ii) 422 RSUs, which will vest on January 13, 2023, and (ii) 423 RSUs, which will vest on
January 13, 2024 so long as Mr. Patrick is a member of our board of directors on such date.

PROPOSAL NO. 1

ELECTION OF DIRECTORS

Our board of directors is currently composed of eight members. In accordance with our amended and

restated certificate of incorporation, our board of directors is divided into three staggered classes of
directors. At the Annual Meeting, two Class III directors will be elected for a three-year term to succeed
the same class whose term is then expiring.

Each director’s term continues until the election and qualification of his or her successor, or such
director’s earlier death, resignation or removal. Any increase or decrease in the number of directors will be
distributed among the three classes so that, as nearly as possible, each class will consist of one-third of our
directors. This classification of our board of directors may have the effect of delaying or preventing
changes in the control of our Company.

Nominees

Our nominating and corporate governance committee has recommended, and our board of directors
has approved, Donna L. Dubinsky and Deval Patrick as nominees for election as Class III directors at the
Annual Meeting. If elected, each of Ms. Dubinsky and Mr. Patrick will serve as Class III directors until the
2025 annual meeting of stockholders and until their successors are duly elected and qualified. Each of the
nominees is currently a director of our Company. For information concerning the nominees, please see the
section titled “Board of Directors and Corporate Governance.”

If you are a stockholder of record and you sign your proxy card or vote by telephone or over the
Internet but do not give instructions with respect to the voting of directors, your shares will be voted
“FOR” the election of Ms. Dubinsky and Mr. Patrick. We expect that Ms. Dubinsky and Mr. Patrick will
each accept such nomination; however, in the event that a director nominee is unable or declines to serve
as a director at the time of the Annual Meeting, the proxies will be voted for any nominee designated by
our board of directors to fill such vacancy. If you are a street name stockholder and you do not give voting
instructions to your broker or nominee, your broker will leave your shares unvoted on this matter.

Vote Required

The election of directors requires a plurality of the voting power of the shares of our common stock be

present virtually or by proxy at the Annual Meeting and entitled to vote thereon to be approved.
Abstentions and broker non-votes will have no effect on this proposal. See “Procedural Matters—How
many votes are needed for approval of each proposal?” for further information.

Recommendation of the Board of Directors

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR”
EACH OF THE NOMINEES NAMED ABOVE.

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PROPOSAL NO. 2

RATIFICATION OF APPOINTMENT OF
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

Our audit committee has appointed KPMG LLP (“KPMG”), an independent registered public
accounting firm, to audit our consolidated financial statements for our fiscal year ending December 31,
2022. During our fiscal year ended December 31, 2021, KPMG served as our independent registered public
accounting firm.

Notwithstanding the appointment of KPMG, and even if our stockholders ratify the appointment, our

audit committee, in its discretion, may appoint another independent registered public accounting firm at
any time during our fiscal year if our audit committee believes that such a change would be in the best
interests of our Company and our stockholders. At the Annual Meeting, our stockholders are being asked
to ratify the appointment of KPMG as our independent registered public accounting firm for our fiscal
year ending December 31, 2022. Our audit committee is submitting the appointment of KPMG to our
stockholders because we value our stockholders’ views on our independent registered public accounting
firm and as a matter of good corporate governance. However, neither the Company’s second amended and
restated bylaws nor other governing documents or law require stockholder ratification of the selection of
KPMG as the Company’s independent registered public accounting firm. Representatives of KPMG will
be present at the Annual Meeting, and they will have an opportunity to make a statement and will be
available to respond to appropriate questions from our stockholders.

If our stockholders do not ratify the appointment of KPMG, our audit committee may reconsider the

appointment.

Fees Paid to the Independent Registered Public Accounting Firm

The following table presents fees for professional audit services and other services rendered to our

Company by KPMG for our fiscal years ended December 31, 2020 and 2021.

Audit Fees(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Audit-Related Fees(2)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax Fees(3)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
All Other Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2020

2021

(in thousands)

$4,293
450
86
—

$4,105
1,261
31
—

Total Fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$4,829

$5,397

(1) Audit Fees consist of professional services rendered in connection with the audit of our

annual consolidated financial statements, including audited financial statements presented in
our Annual Report on Form 10-K and services that are normally provided by the
independent registered public accountants in connection with statutory and regulatory filings
or engagements for those fiscal years, and the review of the financial statements included in
our quarterly reports. Fees for fiscal year 2020 and 2021 also consisted of fees related to SEC
registration statements and other filings, comfort letters and consents, adoption of
accounting pronouncements, acquisitions and our follow-on securities offerings. Fees for
fiscal year 2021 also included work related to the intra-entity asset transfer of certain
intellectual property rights.

(2) Audit-Related Fees consist of professional services rendered in connection with the due

diligence of transactions or events, including acquisitions.

(3) Tax fees consist of fees billed for professional services for tax compliance, tax advice and tax
planning. These services include assistance regarding federal and state tax compliance.

Auditor Independence

In our fiscal year ended December 31, 2021, there were no other professional services provided by
KPMG, other than those listed above, that would have required our audit committee to consider their
compatibility with maintaining the independence of KPMG.

Audit Committee Policy on Pre-Approval of Audit and Permissible Non-Audit Services of Independent

Registered Public Accounting Firm

Our audit committee has established a policy governing our use of the services of our independent
registered public accounting firm. Under this policy, our audit committee is required to pre-approve all
audit, internal control-related services and permissible non-audit services performed by our independent
registered public accounting firm in order to ensure that the provision of such services does not impair the
public accountants’ independence. All services provided by KPMG for our fiscal years ended
December 31, 2020 and 2021 were pre-approved by our audit committee and were compatible with
maintaining KPMG’s independence.

Vote Required

The ratification of the appointment of KPMG as our independent registered public accounting firm

for our fiscal year ending December 31, 2022 requires the affirmative vote of a majority of the voting
power of the shares of our common stock present virtually or by proxy at the Annual Meeting and entitled
to vote thereon. Abstentions will have the effect of a vote against this proposal, and broker non-votes will
have no effect.

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Recommendation of the Board of Directors

THE BOARD OF DIRECTORS RECOMMENDS A VOTE “FOR” THE RATIFICATION OF THE
APPOINTMENT OF KPMG LLP AS OUR INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM.

PROPOSAL NO. 3

NON-BINDING ADVISORY VOTE TO APPROVE THE COMPENSATION OF OUR NAMED
EXECUTIVE OFFICERS

Section 14A of the Exchange Act requires that we provide our stockholders with the opportunity to

vote to approve, on a non-binding, advisory basis, not less frequently than once every three years, the
compensation of our named executive officers as disclosed in this proxy statement in accordance with the
compensation disclosure rules of the SEC. As described in detail under the heading “Executive
Compensation—Compensation Discussion and Analysis,” we seek to closely align the interests of our
named executive officers with the interests of our stockholders.

Our compensation programs are designed to effectively align our executives’ interests with the
interests of our stockholders by focusing on long-term equity incentives that correlate with the growth of
sustainable long-term value for our stockholders.

Stockholders are urged to read the section titled “Executive Compensation” and, in particular, the
section titled “Executive Compensation—Compensation Discussion and Analysis” in this proxy statement,
which discusses how our executive compensation program policies and practices implement our
compensation philosophy and contains tabular information and narrative discussion about the
compensation of our named executive officers. Our board of directors and our compensation and talent
management committee believe that these policies and practices are effective in implementing our
compensation philosophy and in achieving our compensation program goals.

The vote on this resolution is not intended to address any specific element of compensation; rather,

the vote relates to the compensation of our named executive officers, as described in this proxy statement
in accordance with the compensation disclosure rules of the SEC.

Accordingly, we are asking our stockholders to vote on the following resolution at the Annual

Meeting:

RESOLVED, that the stockholders hereby approve, on a non-binding advisory basis, the
compensation paid to the Company’s named executive officers, as disclosed in the Company’s proxy
statement for the 2022 Annual Meeting of Stockholders, pursuant to the compensation disclosure
rules of the SEC, including the Compensation Discussion and Analysis, the compensation tables and
the narrative discussions that accompany the compensation tables.

Vote Required

The approval of this advisory non-binding proposal requires the affirmative vote of a majority of the
voting power of the shares of our common stock present virtually or by proxy at the Annual Meeting and
entitled to vote thereon. Abstentions will have the effect of a vote “against” this proposal, and broker
non-votes will have no effect.

The vote is advisory, which means that the vote is not binding on the Company, our board of directors
or our compensation and talent management committee. To the extent there is any significant vote against
our named executive officer compensation as disclosed in this proxy statement, our compensation and
talent management committee will evaluate whether any actions are necessary to address the concerns of
stockholders.

Recommendation of the Board of Directors

THE BOARD RECOMMENDS THAT YOU VOTE “FOR” THE APPROVAL, ON A NON-BINDING
ADVISORY BASIS, OF THE COMPENSATION OF OUR NAMED EXECUTIVE OFFICERS, AS
DISCLOSED IN THIS PROXY STATEMENT.

REPORT OF THE AUDIT COMMITTEE1

The audit committee is a committee of the board of directors composed solely of independent

directors as required by the listing standards of the New York Stock Exchange, Long-Term Stock
Exchange and rules of the Securities and Exchange Commission (“SEC”). The audit committee operates
under a written charter approved by our board of directors, which is available on our website at https://
investors.twilio.com. The composition of the audit committee, the attributes of its members and the
responsibilities of the audit committee, as reflected in its charter, are intended to be in accordance with
applicable requirements for corporate audit committees. The audit committee reviews and assesses the
audit committee’s performance and the adequacy of its charter on an annual basis.

With respect to our financial reporting process, our management is responsible for (1) establishing

and maintaining internal controls and (2) preparing our consolidated financial statements. Our
independent registered public accounting firm, KPMG LLP (“KPMG”), is responsible for performing an
independent audit of our consolidated financial statements and our internal control over financing
reporting in accordance with the auditing standards of the Public Company Accounting Oversight Board
(United States) (“PCAOB”), and to issue a report thereon. It is the responsibility of the audit committee to
oversee these activities. It is not the responsibility of the audit committee to prepare our financial
statements. These are the fundamental responsibilities of management. In the performance of its oversight
function, the audit committee has:

• reviewed and discussed the audited financial statements for the fiscal year ended December 31,

2021 and management’s report on internal control over financial reporting with management and
KPMG;

• discussed with KPMG the matters required to be discussed by the statement on Auditing Standards
No. 1301, as amended (AICPA, Professional Standards, Vol. 1. AU section 380), and as adopted by
the PCAOB in Rule 3200T; and

• received the written disclosures and the letter from KPMG required by applicable requirements of
the PCAOB regarding the independent accountant’s communications with the audit committee
concerning independence and has discussed with KPMG its independence.

Based on the audit committee’s review and discussions with management and KPMG, the audit
committee recommended to the board of directors that the audited financial statements be included in the
Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

Respectfully submitted by the audit committee of the board of directors:

Jeff Epstein (Chairperson)
Donna L. Dubinsky
Erika Rottenberg

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1 This report of the audit committee is required by the SEC and, in accordance with the SEC’s rules, will not be
deemed to be part of or incorporated by reference by any general statement incorporating by reference this
proxy statement into any filing under the Securities Act or under the Exchange Act, except to the extent that
we specifically incorporate this information by reference, and will not otherwise be deemed “soliciting
material” or “filed” under either the Securities Act or the Exchange Act.

EXECUTIVE OFFICERS

The following table identifies certain information about our executive officers as of May 4, 2022. Our

executive officers are appointed by, and serve at the discretion of, our board of directors and hold office
until his or her successor is duly elected and qualified or until his or her earlier resignation or removal.
There are no family relationships among any of our directors or executive officers.

Name

Jeff Lawson . . . . . . . . . . . . . . . . . . . . .
Khozema Shipchandler . . . . . . . . . . .
Elena Donio . . . . . . . . . . . . . . . . . . . .
Eyal Manor . . . . . . . . . . . . . . . . . . . . .
Dana R. Wagner . . . . . . . . . . . . . . . .

Age

44
48
52
48
46

Position

Co-Founder, Chief Executive Officer and Chairperson
Chief Operating Officer and Principal Financial Officer
President of Revenue
Chief Product Officer
Chief Legal Officer, Chief Compliance Officer and
Corporate Secretary

Executive Officers

Jeff Lawson. Mr. Lawson is one of our founders and has served as our Chief Executive Officer and
as a member of our board of directors since April 2008 and has served as the Chairperson of our board of
directors since November 2015. From 2001 to 2008, Mr. Lawson served as founder and Chief Technology
Officer of Nine Star, Inc., a multi-channel retailer of equipment and apparel to the action sports industry.
From 2004 to 2005, Mr. Lawson served as Technical Product Manager of Amazon.com, Inc., an electronic
commerce and cloud computing company. In 2000, Mr. Lawson served as Chief Technology Officer of
StubHub, Inc., an online marketplace for live entertainment events. From 1998 to 2000, Mr. Lawson
served in several roles at Versity.com, Inc., a website for college lecture notes, including as founder, Chief
Executive Officer and Chief Technology Officer. Mr. Lawson holds a B.S. in Computer Science and Film/
Video from the University of Michigan.

Mr. Lawson was selected to serve on our board of directors because of the perspective and experience
he brings as our Chief Executive Officer, one of our founders and as one of our larger stockholders, as well
as his extensive experience as an executive with other technology companies.

Khozema Shipchandler. Mr. Shipchandler has served as our Chief Operating Officer since October

2021, and prior to that served as our Chief Financial Officer from November 2018. From 2015 to 2018,
Mr. Shipchandler served as chief financial officer and executive vice president of corporate development at
GE Digital, an operational technology and infrastructure software company that is a division of General
Electric Company, a publicly traded industrial technology company. From 1996 to 2015, Mr. Shipchandler
served in various executive roles at General Electric Company, including as chief financial officer, Middle
East, North Africa and Turkey from 2011 to 2013. Mr. Shipchandler holds a B.A. in English and Biology
from Indiana University Bloomington.

Elena Donio. Ms. Donio has served as our President of Revenue since May 2022. From 2016 to April

2022, Ms. Donio served as a member of our board of directors. From 2016 to 2020, Ms. Donio served as
Chief Executive Officer at Axiom Global, a leading provider of tech-enabled legal services. From 1998 to
2016, Ms. Donio served in several roles, including as President, Executive Vice President and General
Manager of Worldwide Small and Mid-Sized Businesses, at Concur Technologies, Inc., a business travel
and expense management software company, which was acquired by SAP SE in 2014. From 1995 to 1997,
Ms. Donio served as Senior Manager at Deloitte Consulting LLP, a professional services firm. From 1992
to 1995, Ms. Donio served as Senior Consultant at Andersen Consulting LLP, a business consulting firm.
Ms. Donio holds a B.A. in Economics from the University of California, San Diego.

Eyal Manor. Mr. Manor has served as our Chief Product Officer since November 2021. From 2007
to 2021, he served in a variety of roles at Google LLC, a technology company, including as Vice President
and General Manager of Engineering and Product and Vice President of Engineering, where he led a

portfolio of products and technologies. Prior to that, Mr. Manor held executive positions leading startups,
including serving as vice president of research and development for a voice and video SaaS streaming
startup. Mr. Manor was an advisor for CapitalG from 2015 to 2021. Mr. Manor graduated with a B.A. in
Economics from Tel Aviv University.

Dana R. Wagner. Mr. Wagner has served as our Chief Legal Officer, Chief Compliance Officer and
Secretary since December 2021. From 2018 to 2021, Mr. Wagner served as the Chief Legal Officer of the
biotechnology company Impossible Foods Inc., where he led the legal, policy, quality control, and security
functions. From 2018 to 2020, he was Adjunct Professor at Northwestern University, and he has taught and
lectured at Berkeley Law since 2019. From 2011 to 2016, Mr. Wagner was General Counsel of the financial
technology company Square, Inc. (now Block, Inc.). Mr. Wagner served in various positions at Google Inc.,
from May 2007 to July 2011, where he oversaw the antitrust and competition legal practice, and prior to
2007, he held various positions in the U.S. Department of Justice. Mr. Wagner currently serves on the
board of directors of Centre Consortium and the Museum of Art and Digital Entertainment. Mr. Wagner
holds a B.A. in comparative literature and economics from the University of California, Berkeley, and a
J.D. from Yale Law School.

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Compensation Discussion and Analysis

EXECUTIVE COMPENSATION

This Compensation Discussion and Analysis describes the compensation program for our named

executive officers. During the fiscal year ended December 31, 2021, these individuals were:
Named Executive Officer

Position

Jeff Lawson . . . . . . . . . . . . . . . . . . . . . Chief Executive Officer and Chairperson
Khozema Shipchandler(1)
Eyal Manor . . . . . . . . . . . . . . . . . . . . . Chief Product Officer
Marc Boroditsky(2) . . . . . . . . . . . . . . . Chief Revenue Officer
Dana R. Wagner . . . . . . . . . . . . . . . . Chief Legal Officer, Chief Compliance Officer and Corporate

. . . . . . . . . Chief Operating Officer and Principal Financial Officer

George Hu(3) . . . . . . . . . . . . . . . . . . . . Former Chief Operating Officer
Chee Chew(4)

. . . . . . . . . . . . . . . . . . . Former Chief Product Officer

Secretary

(1) Mr. Shipchandler was appointed Chief Operating Officer effective October 27, 2021, having

previously served as our Chief Financial Officer.

(2) On April 28, 2022, Mr. Boroditsky notified us of his intention to resign from his position as Chief

Revenue Officer, effective immediately. Mr. Boroditsky’s last day of employment will be August 19,
2022.

(3) Mr. Hu ceased to be an executive officer when he resigned as Chief Operating Officer effective

October 27, 2021. He served as a strategic advisor through the end of fiscal 2021.

(4) Mr. Chew’s employment with us ended effective May 17, 2021.

This Compensation Discussion and Analysis describes the material elements of our executive
compensation program during 2021 and certain aspects of our compensation program for 2022. It also
provides an overview of our executive compensation philosophy and objectives. Finally, it discusses how
our compensation and talent management committee of our board of directors arrived at the specific
compensation decisions for our executive officers, including our named executive officers, for 2021,
including the key factors that our compensation and talent management committee considered in
determining their compensation.

Executive Summary

Business Overview

Twilio spent over a decade building the leading cloud communications platform, but communications

is just the beginning. Twilio’s vision is to become the leading customer engagement platform, ultimately
providing businesses with the holy grail—a single view of the customer journey and the ability to take
action, delivering real-time, personalized communications. We believe the future of customer engagement
will be written in software by the developers of the world—our customers.

Cloud platforms are a category of software that enable developers to build and manage applications

without the complexity of creating and maintaining the underlying infrastructure. These platforms have
arisen to enable a fast pace of innovation across a range of categories, such as computing and storage. As
the leader in the cloud communications platform category, we enable developers to build, scale and
operate real-time customer engagement within software applications.

We offer a customer engagement platform with software designed to address specific use cases, like

and email capabilities into their applications, and are designed to support almost all the fundamental ways
humans communicate, unlocking innovators to address just about any communication market. The Super
Network is our software layer that allows our customers’ software to communicate with connected devices
globally. It interconnects with communications networks and inbox service providers around the world and
continually analyzes data to optimize the quality and cost of communications that flow through our
platform. The Super Network also contains a set of APIs giving our customers access to more foundational
components of our platform, like phone numbers and session initiation protocol (“SIP”) Trunking.

Our overall strategy is to develop great APIs that developers love. These developers are our

champions and bring us “in” to companies of every type, most frequently utilizing our messaging and email
tools as an entry point. This “in” motion creates initial relationships with customers of all sizes including
major enterprises that allow us to move “up” the software stack and provide those companies with
software solutions that address their customer engagement requirements from marketing to sales and
support. Today, we offer Twilio Campaigns for marketing, Twilio Flex for customer support and Twilio
Verify to onboard and recognize customers. The more strategic nature of these software products also
allows us to move up the organization chart, interacting with more senior and strategic purchasers. This
“in” and “up” strategy is a motion we work on improving every day. We will also continue to invest
aggressively in our platform approach, which prioritizes increasing our reach and scale.

Fiscal 2021 Performance Highlights

In 2021, we continued to grow revenue and diversify our business, both internationally and across

different customer sizes, and we achieved the following significant financial and operational results:

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• Revenue of $2.84 billion for the full year 2021, up 61% year-over-year, including $200.9 million

from Twilio Segment, and $55.4 million from Zipwhip, Inc. (“Zipwhip”), a leading provider of toll-
free messaging in the United States that we acquired in 2021.

• GAAP loss from operations of $915.6 million for the full year 2021, compared with GAAP loss

from operations of $492.9 million for the full year 2020.

• Non-GAAP income from operations of $2.5 million for the full year 2021, compared with

non-GAAP income from operations of $35.7 million for the full year 2020.

• More than 256,000 Active Customer Accounts as of December 31, 2021 (excluding customer
accounts from our Zipwhip business), compared to 221,000 Active Customer Accounts as of
December 31, 2020.

Please refer to Appendix A of this proxy statement for a more detailed discussion of how we measure

Active Customer Accounts and other key business metrics and for a reconciliation of GAAP loss from
operations to non-GAAP income (loss) from operations.

Fiscal 2021 Executive Compensation Highlights

Based on our overall operating environment and these results, our compensation and talent
management committee took the following key actions with respect to the compensation of our named
executive officers for 2021:

• Base Salary—At our Chief Executive Officer’s request, our compensation and talent management
committee did not increase his base salary from its 2020 level, other than a nominal increase for
rounding purposes. We made market adjustments to the base salary of certain other named
executive officers, as we continue to move the target total cash compensation of certain named
executive officers closer to the market median.

• Long-Term Incentive Compensation—We granted ongoing long-term incentive compensation

opportunities to our named executive officers in the form of time-based stock options to purchase

shares of our Class A common stock and time-based RSUs that may be settled for shares of our
Class A common stock. Our Chief Executive Officer received an equity award with an aggregate
grant date fair value of approximately $13.9 million.

• No Annual Cash Bonus Program—Since July 1, 2015, we have not maintained a formal annual cash

bonus plan for any of our executive officers, including our named executive officers. As described in
“Oversight of Executive Compensation Program—Cash Incentives” below, Mr. Boroditsky
participates in our sales commission program.

Fiscal 2021 Executive Transitions

Mr. Shipchandler was appointed Chief Operating Officer effective October 27, 2021. Prior to that

time, Mr. Shipchandler served as our Chief Financial Officer. Also effective October 27, 2021,
Mr. Boroditsky assumed an expanded role in his position as Chief Revenue Officer and subsequently
became an executive officer.

Mr. Manor joined as Chief Product Officer as of November 15, 2021. Mr. Chew, our former Chief

Product Officer, ceased to be employed by us as of May 17, 2021.

Mr. Wagner joined as Chief Legal Officer on December 13, 2021. Karyn Smith, our former General

Counsel, ceased to be an executive officer as of December 15, 2021, but remained an employee of the
Company until January 7, 2022.

Mr. Hu resigned as our Chief Operating Officer as of October 27, 2021. Following his resignation,

Mr. Hu remained as a strategic advisor until January 3, 2022.

Pay-for-Performance Analysis

We believe our executive compensation program is reasonable and competitive, and appropriately
balances the goals of attracting, motivating, rewarding and retaining our executive officers with the goal of
aligning their interests with those of our stockholders. The annual compensation of our executive officers,
including our named executive officers, varies from year to year based on our corporate financial and
operational results and individual performance. While we do not determine either contingent (“variable”)
or “fixed” pay for each named executive officer with reference to a specific percentage of target total direct
compensation, consistent with our “pay-for-performance” philosophy, our executive compensation
program heavily emphasizes “variable” pay over “fixed” pay.

In 2021, the majority of the target total direct compensation of our Chief Executive Officer consisted

of variable pay in the form of long-term incentive compensation opportunities. Fixed pay, primarily
consisting of base salary, made up only 1% of our Chief Executive Officer’s target total direct
compensation, while variable pay, consisting of long-term incentive compensation in the form of equity
awards, made up the remaining 99% of his target total direct compensation. Similar allocations applied to
our other executive officers, including each of our other named executive officers. The following charts
show the percentages of target variable pay versus target fixed pay for our Chief Executive Officer and our
other named executive officers in 2021:

CEO
Target Pay Mix

Average Other Named
Executive Officer Target Pay Mix

49%

50%

61%

33%

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Base Salary

Stock Options

RSUs

Base Salary
RSUs

Stock Options
Other (sales commissions)

We believe that this approach provides balanced incentives for our executive officers to drive our

financial performance and create long-term stockholder value.

Executive Compensation Policies and Practices

We endeavor to maintain sound governance standards consistent with our executive compensation

policies and practices. Our compensation and talent management committee evaluates our executive
compensation program on at least an annual basis to ensure that it is consistent with our short-term and
long-term goals given the dynamic nature of our business and the market in which we compete for
executive talent. The following summarizes our executive compensation and related policies and practices:

What We Do

What We Don’t Do

Use a Pay-for-Performance Philosophy. The vast
majority of our executive officers’ target total
direct compensation is directly linked to the
performance of our stock price, and beginning in
2022, will align certain elements with the
achievement of corporate growth objectives.

No Retirement Plans. We do not currently offer
pension arrangements, nonqualified deferred
compensation arrangements or retirement plans
to our executive officers other than a
Section 401(k) retirement plan that is generally
available to all our U.S. employees.

Compensation “At Risk.” Our executive
compensation program is designed so that a
significant portion of our executive officers’
target total direct compensation is equity-based,
and therefore “at risk,” to align the interests of
our executive officers and stockholders.

No Short-Term Cash Bonus Program or
Guaranteed Bonuses. We do not maintain a
formal cash bonus program for our executive
officers, nor do we provide guaranteed bonuses
to our executive officers. As described below,
Mr. Boroditsky participates in our sales
commission program.

What We Do

What We Don’t Do

“Double-Trigger” Change-in-Control
Arrangements. Post-employment compensation
arrangements for all current executive officers in
the event of a change in control of the Company
are “double-trigger” arrangements that require
both a change in control of the Company plus a
qualifying termination of employment before
payments and benefits are paid. All such
payments and benefits are also subject to the
execution and delivery of an effective release of
claims in our favor.

Limited Perquisites or Other Personal Benefits.
We provide limited perquisites and other
personal benefits to our executive officers,
which, in 2021, consisted of matching
contributions to Section 401(k) accounts, and
reimbursements for our Chief Executive
Officer’s costs incurred in connection with his
filing under the Hart-Scott-Rodino Antitrust
Improvement Act of 1976 (“HSR”) and related
tax gross up and legal fees.

Maintain an Independent Compensation and
Talent Management Committee. Our
compensation and talent management committee
consists solely of independent, non-employee
directors.

Limited Tax Payments on Perquisites. Except as
otherwise specified, we generally do not provide
any tax reimbursement payments (including
“gross-ups”) on any perquisites or other
personal benefits.

Retain an Independent Compensation Advisor.
Our compensation and talent management
committee has engaged its own independent
compensation advisor to provide information,
analysis and other advice on executive
compensation independent of management.

No Excise Tax Payments on Future Post-
Employment Compensation Arrangements. We
do not provide any excise tax reimbursement
payments (including “gross-ups”) with respect to
payments or benefits contingent upon a change
in control of our Company.

Annual Executive Compensation Review. Our
compensation and talent management committee
conducts an annual review of our compensation
strategy, including a review of our compensation
peer group used for comparative and
benchmarking purposes.

No Hedging. We prohibit our employees,
including our executive officers, and the
non-employee members of our board of
directors from engaging in hedging transactions
or certain derivative transactions relating to our
securities.

Annual Compensation-Related Risk Assessment.
Our compensation and talent management
committee reviews, on an annual basis, our
compensation-related risk profile.

Stock Ownership Policy. We maintain a robust
stock ownership policy for our Chief Executive
Officer, our other named executive officers and
the non-employee members of our board of
directors.

No Pledging. We prohibit our executive officers
and the non-employee members of our board of
directors from holding our securities in a margin
account or pledging our securities as collateral
for a loan.

No Special Welfare or Health Benefits. We do
not provide our executive officers with any
special welfare or health benefit programs, and
participation in the employee programs that are
standard in our industry sector is on the same
basis as all of our full-time employees.

Annual Say-on-Pay Vote on Executive Compensation

Our board of directors has elected to hold an advisory vote on executive compensation on an annual
basis (the “Say-on-Pay Vote”), thereby giving our stockholders the opportunity to provide feedback on the
compensation of our named executive officers each year. As reported in our current report on Form 8-K
filed with the SEC on June 16, 2021, approximately 73% of the votes cast on the proposal expressed
support for the compensation program offered to our named executive officers as disclosed in last year’s
proxy statement. We will be conducting our annual Say-on-Pay Vote as described in Proposal No. 3 of this

proxy statement at the 2022 Annual Meeting of Stockholders. The next Say-on-Pay Vote will be held at our
2023 Annual Meeting of Stockholders.

Commitment to Stockholder Engagement

As we manage our business with a focus on continued innovation and growth, we recognize that our

compensation program must balance stockholder perspectives with our ability to retain and attract the
highest caliber of talent to help facilitate growth at scale. Our board of directors and our compensation
and talent management committee value the stockholder perspectives we receive, through direct
engagement as well as through voting decisions, including our annual Say-on-Pay Vote at our annual
stockholder meetings, and the compensation-related feedback we receive from stockholders is an
important component that informs the compensation and talent management committee’s decision-
making process when reviewing our executive compensation programs each year.

We have established a robust stockholder engagement program to help us better understand the
perspectives of our stockholders. In 2021, in addition to our standard engagement with stockholders
throughout the year, we conducted meetings with several of our large stockholders, with participation from
our management team and certain members of our board of directors, including Ms. Rottenberg, the
chairperson of our nominating and corporate governance committee, and, until her resignation from our
board of directors, Ms. Donio, the former chairperson of our compensation and talent management
committee on topics ranging from compensation strategy, to environmental, social and governance matters
(“ESG”), including board structure and corporate governance. In addition, our head of investor relations
regularly communicates stockholder feedback to senior management and the board of directors for
consideration in their decision making.

The 2021 executive compensation program was implemented in early 2021, and the compensation and

talent management committee, in connection with input from our full board of directors, determined at
that time that our concentration on equity compensation, particularly the grant of equity awards in the
form of 50% (by fair value) stock options and 50% (by fair value) RSUs with time-based vesting, is aligned
with long-term stockholder value. However, our compensation and talent management committee
continues to assess the Company’s equity compensation practices in light of the Company’s continued
growth and maturation as well as discussions with stockholders and determined to implement changes to
our executive compensation program beginning in 2022 to grant performance-based equity awards as part
of our executive compensation program, as discussed in “Evolving our Executive Compensation Program”
below.

We believe the addition of performance-based equity awards, as well as other enhancements to our

governance practices and disclosures in response to stockholder feedback, such as increasing our stock
ownership requirements for directors and executive offices and enhancing our ESG disclosures, have
advanced our compensation practices and governance in a manner that both benefits stockholders and
continues to align with our strategy and pay philosophy.

Executive Compensation Philosophy

We operate in an extremely competitive market where there is substantial and continuous

competition for leadership with the experience and skill to lead in a dynamic and innovative industry. Our
executive compensation program is guided by our overarching philosophy of paying for demonstrable
performance and aligning the compensation of our executive officers with the long-term interests of our
stockholders. Consistent with this philosophy, we designed our executive compensation program to achieve
the following primary objectives:

• attract, motivate, incentivize and retain employees at the executive level who contribute to our long-

term success;

• provide compensation packages to our executive officers that are competitive and reward the

achievement of our business objectives; and

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• effectively align our executive officers’ interests with the interests of our stockholders by focusing on
long-term equity incentives that correlate with the growth of sustainable long-term value for our
stockholders.

Because we do not have a cash bonus program for our executive officers, generally, our compensation

and talent management committee has sought to set base salaries at the higher end of the competitive
market range to provide what it believes to be reasonable cash compensation levels and will serve to attract
and retain our executive officers. Further, our compensation and talent management committee tends to
weight the target total direct compensation opportunities of our executive officers more heavily towards
equity compensation. We understand the importance of linking the individual performance of our
executive officers and the financial and operational performance of our company to our overall executive
compensation program. We believe our strong focus on, and heavy weighting toward, equity compensation
supports that philosophy and has worked to align our executive compensation with the interests of our
stockholders. However, we continue to review the current equity compensation trends as well as the
feedback from our stockholders in regard to our executive compensation program.

Evolving our Executive Compensation Program

In March 2022, in addition to granting time-based restricted stock unit awards to our named executive

officers, our compensation and talent management committee also granted performance-based restricted
stock unit awards. The performance-based awards vest based on the achievement of certain goals over
specified performance periods, including year-over year organic revenue growth rates and non-GAAP
operating profit, and are intended to further align the interests of our named executive officers and our
stockholders.

Oversight of Executive Compensation Program

Role of the Compensation and Talent Management Committee

Our compensation and talent management committee discharges many of the responsibilities of our
board of directors relating to the compensation of our executive officers, including our named executive
officers, and the non-employee members of our board of directors (as described further in “Board of
Directors and Corporate Governance—Non-Employee Director Compensation” above). Our
compensation and talent management committee has overall responsibility for overseeing our
compensation structure, policies and programs generally, and overseeing and evaluating the compensation
plans, policies and practices applicable to our executive officers. Our compensation and talent
management committee also oversees the annual evaluation of our executive officers, including our named
executive officers, for the prior fiscal year and has the authority to retain, and has retained, an independent
compensation consultant to provide support to the committee in its review and assessment of our
compensation programs.

Compensation-Setting Process

Our compensation and talent management committee determines the target total direct
compensation opportunities for our executive officers, including our named executive officers. Our
compensation and talent management committee does not use a single method or measure in developing
its recommendations, nor does it establish one specific target for the total direct compensation
opportunities of our executive officers. Rather, it retains flexibility to pay our executive officers within
certain ranges. Nonetheless, our compensation and talent management committee generally begins its
deliberations on cash and equity compensation levels with reference to various percentile levels for cash
compensation and target total direct compensation as reflected in competitive market data, with an
intended result of weighting compensation more heavily towards equity compensation.

When formulating its recommendations for the amount of each compensation element and approving

each compensation element and the target total direct compensation opportunity for our executive
officers, our compensation and talent management committee considers the following factors:

• our performance against the financial and operational objectives established by our compensation

and talent management committee and our board of directors;

• our financial performance relative to our compensation peer group;

• the compensation levels and practices of our compensation peer group;

• each individual executive officer’s skills, experience and qualifications relative to other similarly

situated executives at the companies in our compensation peer group and in selected broad-based
compensation surveys;

• our desire to retain experienced and talented executives in a highly competitive market;

• the scope of each individual executive officer’s role compared to other similarly situated executives

at the companies in our compensation peer group and in selected broad-based compensation
surveys;

• the performance of each individual executive officer, based on a subjective assessment of his or her
contributions to our overall performance, ability to lead his or her business unit or function and
ability to work as part of a team, all of which reflect our core values;

• compensation parity among our individual executive officers; and

• the recommendations provided by our Chief Executive Officer with respect to the compensation of

our other executive officers.

These factors provide the framework for compensation decision-making and final decisions regarding

the compensation opportunity for each executive officer. No single factor is determinative in setting pay
levels, nor was the impact of any factor on the determination of pay levels quantifiable. Our compensation
and talent management committee reviews the base salary levels and long-term incentive compensation
opportunities of our executive officers, including our named executive officers, each fiscal year at the
beginning of the year, or more frequently as warranted. Long-term incentive compensation is granted on a
regularly-scheduled basis, as described in “Other Compensation Policies and Practices—Equity Awards
Grant Policy” below.

Role of Chief Executive Officer

In discharging its responsibilities, our compensation and talent management committee consults with

members of our management, including our Chief Executive Officer. Our management assists our
compensation and talent management committee by providing information on corporate and individual
performance, market compensation data and management’s perspective on compensation matters. Our
compensation and talent management committee solicits and reviews our Chief Executive Officer’s
recommendations and proposals with respect to adjustments to annual cash compensation, long-term
incentive compensation opportunities, program structures and other compensation-related matters for our
executive officers, other than with respect to his own compensation.

Our compensation and talent management committee reviews and discusses these recommendations

and proposals with our Chief Executive Officer and considers them as one factor in determining the
compensation for our executive officers, including our other named executive officers. Our Chief
Executive Officer recuses himself from all deliberations and determinations regarding his own
compensation.

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Role of Compensation Consultant

Our compensation and talent management committee engages an external independent compensation

consultant to assist it by providing information, analysis and other advice relating to our executive
compensation program and the decisions resulting from its annual executive compensation review. For
2021, our compensation and talent management committee engaged Compensia as its compensation
consultant to advise on executive compensation matters, including competitive market pay practices for
our executive officers, the selection of our compensation peer group, and data analysis. For 2021, the scope
of Compensia’s engagement included:

• researching, developing and reviewing our compensation peer group;

• reviewing and analyzing the compensation for our executive officers, including our named executive

officers;

• supporting the design and implementation of changes to our executive long-term incentive strategy;

• reviewing and providing input on the Compensation Discussion and Analysis section of our proxy

statement for our 2021 Annual Meeting of Stockholders;

• reviewing and analyzing the compensation of the non-employee members of our board of directors;

• reviewing short-term incentive compensation practices and considerations;

• reviewing peer group executive incentive compensation practices;

• reviewing peer group executive severance and change in control practices;

• reviewing our executive compensation philosophy;

• conducting a compensation risk assessment;

• advising regarding non-employee director compensation; and

• supporting other ad hoc matters throughout the year.

The terms of Compensia’s engagement included reporting directly to our compensation and talent

management committee and to our compensation and talent management committee chairperson.
Compensia also coordinated with our management for data collection and job matching for our executive
officers and provided data and analyses in connection with the review of our equity strategy. In 2021,
Compensia did not provide any other services to us. In March 2021, our compensation and talent
management committee evaluated Compensia’s independence pursuant to NYSE and LTSE Listing
Standards and the relevant SEC rules and determined that no conflict of interest had arisen as a result of
the work performed by Compensia.

Use of Market Data

For purposes of comparing our executive compensation against the competitive market, our
compensation and talent management committee reviews and considers the compensation levels and
practices of a group of peer companies. This compensation peer group consists of technology companies
that are similar to us in terms of industry, revenue and market capitalization.

Our compensation and talent management committee reviews our compensation peer group at least
annually and makes adjustments to its composition if warranted, taking into account changes in both our
business and the businesses of the companies in the peer group, and input from its compensation
consultant. Accordingly, the peer group that was used for comparative purposes for 2021 was approved in
September 2020.

In developing the compensation peer group for 2021, the following criteria were evaluated in

identifying comparable companies:

• similar industry and competitive market for talent;

• within a range of 0.5x to 2.0x of our projected revenue for the following four fiscal quarters (as of

August 2020); and

• within a range of 0.25x to 4.0x of our then-market capitalization.

In September 2020, the compensation and talent management committee reviewed our compensation
peer group and, upon the recommendation of its compensation consultant, added Ansys, Coupa Software,
Fortinet, Intuit, Synopsys and The Trade Desk to the compensation peer group and removed Dropbox,
Guidewire Software, Hubspot, New Relic, Paylocity Holding, Proofpoint and Zendesk. The peer group for
2021, which was approved by the compensation and talent management committee in September 2020,
consisted of the following companies:

Ansys
Arista Networks
Autodesk
Coupa Software
DocuSign
Fortinet

Intuit
Okta
Palo Alto Networks
Paycom Software
RingCentral
ServiceNow

Shopify
Slack Technologies
Splunk
Synopsys
The Trade Desk
Veeva Systems

VeriSign
Workday
Zoom Video

Our compensation and talent management committee uses data drawn from our compensation peer
group, as well as data from the Radford Global Technology executive compensation survey (the “Radford
Survey”), to evaluate the competitive market when formulating its recommendation for the total direct
compensation packages for our executive officers, including base salary and long-term incentive
compensation opportunities. The Radford Survey provides compensation market intelligence and is widely
used within the technology industry.

In addition, subsets of the Radford Survey were incorporated into the competitive assessment

prepared by Compensia and used by our compensation and talent management committee to evaluate the
compensation of our executive officers. Specifically, our compensation and talent management committee
received a custom report of survey results reflecting only companies from our compensation peer group in
addition to survey results tailored solely based on revenue. The Radford Survey data supplements the
compensation peer group data and provides additional information for our named executive officers and
other executive positions for which there is less comparable public data available.

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Individual Compensation Elements

In 2021, the principal elements of our executive compensation program, and the purposes for each

element, were as follows:
Element

Base Salary . . . . . . . . . . . . . . . . . . . . Cash

Compensation Element

Objective

Designed to attract and retain
highly talented executives by
providing fixed compensation
amounts that are competitive in
the market and reward
performance.

Designed to align the interests
of our executive officers and our
stockholders by motivating them
to achieve long-term
stockholder value creation. Also
designed to achieve our
retention objectives for our
executive officers.

Long-Term Incentives . . . . . . . . . . . Equity awards in the form of

stock options to purchase shares
of our Class A common stock
and RSUs that may be settled
for shares of our Class A
common stock

Base Salary

Base salary represents the fixed portion of the compensation of our executive officers, including our

named executive officers, and is an important element of compensation intended to attract and retain
highly talented individuals.

Using the competitive market data provided by its compensation consultant, our compensation and
talent management committee reviews and develops recommendations for adjusting the base salaries for
each of our executive officers, including our named executive officers, as part of its annual executive
compensation review. In addition, the base salaries of our executive officers may be adjusted by our
compensation and talent management committee in the event of a promotion or significant change in
responsibilities.

Generally, our compensation and talent management committee sets base salaries with reference to
various percentile levels of the competitive range of our compensation peer group and applicable executive
compensation survey data. Since our initial public offering, we have evaluated the base salaries of our
executive officers in the context of establishing their total cash compensation at levels that are consistent
with the target total cash compensation of executive officers holding comparable positions at public
companies.

In 2021, consistent with the recommendation of our Chief Executive Officer, our compensation and
talent management committee determined to increase the base salaries of our executive officers other than
our Chief Executive Officer. In making these decisions, our compensation and talent management
committee considered the current risks and challenges facing our company, our decision to forego the
adoption of an annual cash bonus program, its objective of gradually positioning the target total cash
compensation of our executive officers at levels that are more consistent with those of a public company in
our industry, as well as the factors described in “Oversight of Executive Compensation Program—
Compensation-Setting Process” above. We recognize that our Chief Executive Officer’s base salary is
significantly lower than the peer group median, despite his success in the role and our willingness to pay
him a market-based salary. However, at our Chief Executive Officer’s request to weight more of his target
total direct compensation to variable pay in the form of long-term incentive compensation, our
compensation and talent management committee determined to maintain his base salary at its 2019 and
2020 levels, other than a nominal increase for rounding purposes.

The base salaries of our named executive officers for 2020 and 2021 (effective January 1, 2021) were

as follows:

Named Executive Officer

Mr. Lawson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mr. Shipchandler(1) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mr. Boroditsky(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mr. Manor(3)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mr. Wagner(4)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mr. Hu(5)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Mr. Chew(6)

2020
Base Salary

2021
Base Salary

$133,700
$624,000

$671,000
$462,000

$ 134,000
$1,100,000
— $ 500,000
— $ 900,000
— $ 600,000
$ 738,000
$ 508,000

(1) In connection with Mr. Shipchandler’s appointment as Chief Operating Officer in

October 2021, his base salary increased. The table reflects his increased base salary as of
December 31, 2021, and his total salary compensation received for 2021 is reflected in
the “Summary Compensation Table” below.

(2) Mr. Boroditsky was not an executive officer in 2020. Mr. Boroditsky’s base salary

increased in connection with his appointment to an expanded role in his position as
Chief Revenue Officer in October 2021. The table reflects his increased base salary as
of December 31, 2021, and his total salary compensation received for 2021 is reflected
in the “Summary Compensation Table” below. In addition, as Mr. Boroditsky’s
responsibilities are focused on sales, his total compensation received for 2021 includes
sales commissions, as described in “Cash Incentives” and reflected in the “Summary
Compensation Table” below. On April 28, 2022, Mr. Boroditsky notified us of his
intention to resign from his position as Chief Revenue Officer, effective immediately.
Mr. Boroditsky’s last day of employment will be August 19, 2022.

(3) Mr. Manor joined us as Chief Product Officer in November 2021 and his base salary was
established at that time. Mr. Manor’s prorated salary for 2021 is reflected in his salary
compensation in the “Summary Compensation Table” below.

(4) Mr. Wagner joined us as Chief Legal Officer in December 2021 and his base salary was
established at that time. Mr. Wagner’s prorated salary for 2021 is reflected in his salary
compensation in the “Summary Compensation Table” below.

(5) Mr. Hu resigned as Chief Operating Officer effective October 2021 and remained

employed as a strategic advisor through fiscal year 2021.

(6) Mr. Chew’s employment with the Company ended effective May 17, 2021.

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The actual base salaries paid to our named executive officers in 2021 are set forth in the “Summary

Compensation Table” below.

Cash Incentives

As our Chief Revenue Officer, Mr. Boroditsky’s responsibilities are focused on sales and his
compensation includes participation in our sales commission plan (the “Sales Commission Plan”) with
terms that are aligned with the results achieved by our global sales team.

For fiscal 2021, after considering competitive market data in consultation with a leading third-party

consultancy for sales compensation, Mr. Boroditsky’s commission opportunity for fiscal 2021 was
determined to be equal to 100% of his annual base salary, consistent with his opportunity for the prior
fiscal year. The Sales Commission Plan is designed to reward Mr. Boroditsky based on annual performance
of total estimated annual recurring revenue (“eARR”), software eARR and company revenue metrics, paid
monthly. Mr. Boroditsky’s monthly payouts are based on performance against the annual target, additive,

with no cap. The performance target levels for Mr. Boroditsky were designed to be challenging to achieve.
The Sales Commission Plan and performance criteria are evaluated annually with an eye to reducing risks
while appropriately incentivizing performance.

Long-Term Incentive Compensation

We view long-term incentive compensation in the form of equity awards as a critical element of our
executive compensation program. The realized value of these equity awards bears a direct relationship to
our stock price, and, therefore, these awards are an incentive for our executive officers, including our
named executive officers, to create value for our stockholders. Equity awards also help us retain qualified
executive officers in a competitive market.

Long-term incentive compensation opportunities in the form of equity awards are granted by our

compensation and talent management committee on a regularly-scheduled basis, as described in “Other
Compensation Policies and Practices—Equity Awards Grant Policy” below. The amount and forms of such
equity awards are determined by our compensation and talent management committee after considering
the factors described in “Oversight of Executive Compensation Program—Compensation-Setting Process”
above. The amounts of the equity awards are also intended to provide competitively-sized awards and
resulting target total direct compensation opportunities that are competitive with the compensation
opportunities offered by the companies in our compensation peer group and Radford Survey data for
similar roles and positions for each of our executive officers, taking into consideration the factors
described in “Oversight of Executive Compensation Program—Compensation-Setting Process” above.

In 2021, our compensation and talent management committee determined that the equity awards to
be granted to our executive officers should be in the form of time-based stock options to purchase shares
of our Class A common stock and time-based RSUs that may be settled for shares of our Class A common
stock. Our compensation and talent management committee determined to grant equity awards in the
form of 50% (by fair value) stock options and 50% (by fair value) time-based RSUs. Stock options only
have value if our stock price appreciates above the exercise price thereof. Both stock options and RSUs
have retention value over the vesting period. In determining the size of the individual grants to our
executive officers, our compensation and talent management committee considered the factors described
in “Oversight of Executive Compensation Program—Compensation-Setting Process” above, with emphasis
on our exceptional growth in size and revenue during 2020. In addition, our compensation and talent
management committee focused on the fact that many of our executive officers are in high demand in the
market due, in part, to our excellent performance in 2020. Therefore, our compensation and talent
management committee considered how best to retain our talent. In determining the size of the equity
grants made to our Chief Executive Officer, the compensation and talent management committee also
factored in Mr. Lawson’s relatively low base salary.

After consideration of these factors, our compensation and talent management committee

determined to grant equity awards to our executive officers with a value in the range of the 70th percentile
to the 85th percentile of our peer group range. Our compensation and talent management committee
determined that the value of these awards was appropriate and necessary to sufficiently reward exceptional
performance, to motivate our executive officers for continued effort to create value for our stockholders
and to help ensure retention in a competitive market. Importantly, our compensation and talent
management committee also determined to maintain the prior deviation from the historic vesting
schedules for executive awards to balance the magnitude of the awards, and also to motivate long-term
retention and team stability. Therefore, the stock options and RSUs granted to our executive officers in
February 2021 vest over four years with 33% vesting in equal quarterly installments between the first and
second anniversaries of the vesting commencement date of December 31, 2020, 33% vesting in equal
quarterly installments between the second and third anniversaries of the vesting commencement date of
December 31, 2020 and 34% vesting in equal quarterly installments between the third and fourth
anniversaries of the vesting commencement date of December 31, 2020, subject to the executive’s

continued employment with us. In addition to the February 2021 grants, our compensation and talent
management committee also granted equity awards to certain executive officers in 2021 in connection with
new hires and promotions with specific vesting schedules, as described further in “Executive
Compensation—Additional Executive Officer Awards” and “Executive Compensation—Grants of Plan-
Based Awards Table” below.

After considering the factors described in “Oversight of Executive Compensation Program—

Compensation-Setting Process” above, our compensation and talent management committee approved the
following equity awards in February 2021 for our then-existing named executive officers in 2021 as part of
its annual executive compensation review:

Named Executive Officer

Jeff Lawson . . . . . . . . . . . . . . . . . . .
Khozema Shipchandler(2) . . . . . . . .
George Hu . . . . . . . . . . . . . . . . . . . .
Chee Chew(3) . . . . . . . . . . . . . . . . . .

Stock Options
to Purchase
Shares of
Class A
Common Stock
(number of shares)

34,132
18,126
18,126
18,126

Time-Based
RSUs
(number of shares)

18,345
9,742
9,742
9,742

Aggregate
Grant Date
Fair Value
($)(1)

13,927,474
7,396,184
7,396,184
7,396,184

(1) The amounts reported in this column represent the aggregate grant date fair value of the

RSUs and stock options granted to the named executive officer in the fiscal year ended
December 31, 2021, calculated in accordance with FASB ASC Topic 718. Such aggregate
grant date fair values do not take into account any estimated forfeitures related to service-
vesting conditions. The valuation assumptions used in determining such amounts are
described in the Notes to our Consolidated Financial Statements included in our Annual
Report on Form 10-K filed with the SEC on February 22, 2022. The amounts reported in
this column reflect the accounting cost for these RSUs and stock options and do not
correspond to the actual economic value that may be received by the named executive
officers upon the vesting or settlement of the RSUs or the exercise of the stock options or
sale of the shares of common stock underlying such stock options.

(2) In connection with his appointment as Chief Operating Officer in October 2021,

(3) Mr. Chew’s employment at Twilio ended effective May 17, 2021. All unvested RSUs and

unvested stock options expired immediately upon termination.

Additional Executive Officer Awards

Mr. Manor received a (1) one-time stock option award with a grant date fair value of $8,098,119 and
(2) one-time restricted stock units award with a grant date fair value of $33,687,986 in connection with his
commencement of employment with us in November 2021. The shares subject to the option vest over four
years in equal monthly installments, and the RSUs vest over four years, with 1/16th of the RSUs vesting on
February 15, 2022 and the remaining RSUs vesting in equal quarterly installments, in each case subject to
continued employment with us.

Mr. Boroditsky received a (1) one-time stock option award with a grant date fair value of $5,158,566
and (2) one-time restricted stock units award with a grant date fair value of $5,131,560 in connection with
his expanded role in his position as Chief Revenue Officer in October 2021. The shares subject to this

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option vest in 24 equal monthly installments, and the RSUs vest over two years, with 1/8th of the RSU
vesting on November 15, 2021 and the remaining RSUs vesting in equal quarterly installments, in each
case subject to continued employment with us. On April 28, 2022, Mr. Boroditsky notified us of his
intention to resign from his position as Chief Revenue Officer, effective immediately. Mr. Boroditsky’s last
day of employment will be August 19, 2022 and the unvested portion of his stock option and RSUs will
cease vesting and be cancelled as of such date.

Mr. Shipchandler also received (1) a one-time stock option award with a grant date fair value of
$2,303,576 and (2) a one-time restricted stock unit award with a grant date fair value of $2,231,126 in
connection with this appointment as Chief Operating Officer, with vesting schedules consistent with his
February 2021 awards. Mr. Wagner commenced employment with us in December 2021 and did not
receive any equity awards in fiscal 2021, but was granted a new hire RSU award in January 2022 in
accordance with his employment offer letter. Please see “Summary Compensation Table,” “Grants of
Plan-Based Awards Table” and “Employment Agreements or Offer Letters with Named Executive
Officers” below for additional information.

Stock Options

We believe that stock options provide a strong reward for growth in the market price of our common
stock as their entire value depends on future stock price appreciation, as well as a strong incentive for our
executive officers to remain employed with our Company as they require continued service to our
Company through the vesting period. In 2021, the stock options to purchase shares of our Class A common
stock that were granted by our compensation and talent management committee generally had a 10-year
term. To balance retention and incentive dynamics for the stock option grants made in February 2021, the
vesting schedule for such grants were set as follows: 33% of the shares subject to the stock option vest in
equal quarterly installments between the first and second anniversaries of the “vesting commencement
date” (December 31, 2020), 33% of the shares subject to the stock option vest in equal quarterly
installments between the second and third anniversaries of the vesting commencement date and 34% of
the shares subject to the stock option vest in equal quarterly installments between the third and fourth
anniversaries of the vesting commencement date, subject to continued employment through each such
vesting date. The options subject to Mr. Borodistky’s October 2021 grant expire three years from the date
of his separation from service due to termination by the company without Cause or by Mr. Boroditsky for
Good Reason, as those terms are defined in the Boroditsky Letter (as defined below), or 10 years from the
date of the grant, whichever comes first.

Stock options granted by our compensation and talent management committee to newly-hired
executives generally have had a 10-year term and generally vested as to 25% of the shares subject to the
stock option on the first anniversary of the employment commencement date and 1/48th of the shares
subject to the stock option each month thereafter for the following three years, subject to continued
service through each such vesting date. Effective February 1, 2022, and applicable retrospectively to
affected employees, stock options previously granted to our executive officers vest in equal monthly
installments from the applicable vesting commencement date, subject to the executive’s continued
employment with us. Please see “Summary Compensation Table” and “Grants of Plan-Based Awards
Table” below for additional information.

Time-Based RSUs

We believe time-based RSUs also provide a strong retention incentive for our executive officers,

provide a moderate reward for growth in the value of our Class A common stock and, because they use
fewer shares than stock options, are less dilutive to our stockholders. In 2021, similar to the stock option
grants, in order to balance retention and incentive dynamics for the time-based RSU grants that may be
settled in shares of our Class A common stock, the vesting schedule for such grants were set as follows:
33% of the shares subject to the award vest in equal quarterly installments between the first and second
anniversaries of the “vesting commencement date” (December 31, 2020), 33% of the shares subject to the

award vest in equal quarterly installments between the second and third anniversaries of the vesting
commencement date and 34% of the shares subject to the award vest in equal quarterly installments
between the third and fourth anniversaries of the vesting commencement date, subject to continued
employment through each such vesting date.

Time-based RSUs that may be settled in shares of our Class A common stock that were granted by
our compensation and talent management committee to newly-hired executives generally vested as to 25%
of the shares subject to the award on the first anniversary of the first August 15, November 15, February 15
or May 15 to occur following the employment commencement date and 1/16th of the shares subject to the
award each quarter thereafter for the following three years, subject to continued employment through
each such vesting date. Effective February 1, 2022, and applicable retrospectively to affected employees,
RSUs granted to new executive officers vest in equal quarterly installments from the applicable vesting
commencement date, subject to the executive’s continued employment with us.

The equity awards granted to our named executive officers in 2021 are set forth in the “Summary

Compensation Table” and the “Grants of Plan-Based Awards Table” below.

Health and Welfare Benefits

Our executive officers, including our named executive officers, are eligible to receive the same
employee benefits that are generally available to all of our full-time employees, subject to the satisfaction
of certain eligibility requirements. These benefits include our medical, dental and vision insurance and life
and disability insurance plans. In structuring these benefit plans, we seek to provide an aggregate level of
benefits that are comparable to those provided by similar companies.

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In addition, we maintain a tax-qualified Section 401(k) retirement plan that provides eligible U.S.
employees with an opportunity to save for retirement on a tax-advantaged basis. Plan participants are able
to defer eligible compensation subject to the applicable annual limits set forth in the Internal Revenue
Code of 1986, as amended (the “Code”). In 2021, we matched 50% of the first 6% of contributions by plan
participants, subject to annual contribution limits set forth in the Code. We have the ability to make
discretionary contributions to the Section 401(k) plan but have not done so to date. The Section 401(k)
plan is intended to be qualified under Section 401(a) of the Code with the plan’s related trust intended to
be tax exempt under Section 501(a) of the Code. As a tax-qualified retirement plan, contributions to the
Section 401(k) plan and earnings on those contributions are not taxable to the employees until distributed
from the Section 401(k) plan.

Perquisites and Other Personal Benefits

Currently, we do not view perquisites or other personal benefits as a significant component of our
executive compensation program. Accordingly, we do not provide significant perquisites or other personal
benefits to our executive officers, including our named executive officers, except as generally made
available to our employees, or in situations where we believe it is appropriate to assist an individual in the
performance of his or her duties, to award long-standing service to us, to make our executive officers more
efficient and effective and for recruitment and retention purposes.

During 2021, none of our named executive officers received perquisites or other personal benefits that

were, in the aggregate, $10,000 or more for each individual, except for Mr. Lawson, our Chief Executive
Officer, for whom we paid $3,350 for our matching contributions to his Section 401(k) account in 2021,
and his $280,000 filing fee under HSR, as well as $5,595 and $275,335, respectively, for the related legal
fees and tax gross-up. We believe that reimbursing our Chief Executive Officer for the HSR filing fee and
its related legal fees and tax consequences was consistent with our decision to continue to compensate him
almost entirely through equity-compensation arrangements. Absent this regulatory filing, our Chief
Executive Officer would not be able to participate in our long-term incentive compensation program and,
therefore, we determined that it was appropriate for us to reimburse him for this filing fee and any related
tax liabilities.

In the future, we may provide perquisites or other personal benefits in limited circumstances. All
future practices with respect to perquisites or other personal benefits will be approved and subject to
periodic review by our compensation and talent management committee.

Post-Employment Compensation Arrangements

We believe that having in place reasonable and competitive post-employment compensation
arrangements are essential to attracting and retaining highly qualified executive officers. In connection
with our initial public offering in 2016, we adopted an executive severance plan (as amended and restated
in June 2017, the “Amended and Restated Executive Severance Plan”) to provide more standardized
severance payments and benefits to our executive officers. In March 2018, we divided our Amended and
Restated Executive Severance Plan into three separate plans, which we further amended in March 2022.
Our three plans currently apply to our Chief Executive Officer (the “CEO Severance Plan”), our key
executive officers and senior vice-president level employees (the “Key Executive Severance Plan”, together
with our CEO Severance Plan, the “Executive Severance Plans”) and our vice president-level employees
(the “VP Severance Plan”). Our Chief Executive Officer participates in the CEO Severance Plan and our
other named executive officers participate in the Key Executive Severance Plan.

The Executive Severance Plans, as discussed in more detail in “Potential Payments Upon Termination

or Change in Control—Executive Severance Plans” below are designed to help ensure the continued
service of key executive officers in the event of a potential acquisition, to provide reasonable compensation
to executive officers who leave our employ under specified circumstances and to align the interests of our
executive officers and our stockholders when considering our long-term future.

We believe that the severance payments and benefits provided to our executive officers under the
Executive Severance Plans are appropriate in light of the post-employment compensation protections
available to similarly-situated executive officers at companies in our compensation peer group and are an
important component of each executive officer’s overall compensation as they help us to attract and retain
our key executives who could have other job alternatives that may appear to them to be more attractive
absent these protections.

We also believe that the occurrence or potential occurrence of a change in control transaction will
create uncertainty regarding the continued employment of our executive officers. In order to encourage
them to remain employed with us during an important time when their prospects for continued
employment following the transaction are often uncertain, we provide our executive officers with the
opportunity to receive additional severance protections during a change in control protection period. In
addition, we provide additional payment and benefit protections if an executive officer voluntarily
terminates employment with us for good reason in connection with a change in control of our Company,
because we believe that a voluntary termination of employment for good reason is essentially equivalent to
an involuntary termination of employment by us without cause. The primary purpose of these
arrangements is to keep our most senior executive officers focused on pursuing potential corporate
transactions that are in the best interests of our stockholders regardless of whether those transactions may
result in their own job loss. Reasonable post-acquisition payments and benefits should serve the interests
of both the executive officer and our stockholders.

To protect our Company’s interests, we require all participants of the Executive Severance Plans to
sign a standard form of general release in favor of the Company prior to receiving any severance payments
or benefits under the applicable plan.

In addition, under the Executive Severance Plans, all payments and benefits provided in the event of a

change in control of the Company are payable only if there is a qualifying loss of employment by a named
executive officer (commonly referred to as a “double-trigger” arrangement). In the case of the acceleration
of vesting of outstanding equity awards, we use this double-trigger arrangement to protect against the loss
of retention value following a change in control of the Company and to avoid windfalls, both of which
could occur if the vesting of equity awards accelerated automatically as a result of the transaction.

We do not provide excise tax payments (or “gross-ups”) relating to a change in control of our

Company and have no such obligations in place with respect to any of our named executive officers.

For detailed descriptions of the post-employment compensation arrangements we maintain with our

named executive officers, as well as an estimate of the potential payments and benefits payable to our
named executive officers under their post-employment compensation arrangements, see “Employment
Agreements or Offer Letters with Named Executive Officers” and “Potential Payments Upon Termination
or Change in Control” below.

Other Compensation Policies and Practices

Equity Awards Grant Policy

Under our Amended and Restated Equity Award Grant Policy, we generally grant equity awards on a

regularly scheduled basis to enhance the effectiveness of our internal control over our equity award grant
process and to alleviate several of the burdens related to accounting for such equity awards, as follows:

• Any grants of equity awards made in conjunction with the hiring of a new employee or the

promotion of an existing employee will be made, if at all, regularly (either monthly or quarterly)
and will be effective on the date such grant is approved by our board of directors or our
compensation and talent management committee or such future date as is approved by our board of
directors or our compensation and talent management committee. In no event will the effective
date of an equity award made in conjunction with the hiring of a new employee precede the first
date of employment.

• Any grants of equity awards to existing employees (other than in connection with a promotion) will
generally be made, if at all, on an annual or quarterly basis. Any such annual or quarterly grant will
be effective on the date on which such grant is approved or such future date as is approved by our
board of directors or our compensation and talent management committee.

• All equity awards will be priced on the effective date of the award. The exercise price of all stock

options will be equal to the closing market price on The New York Stock Exchange of one share of
our Class A common stock on the effective date of grant, or, if no closing price is reported for such
date, the closing price on the last day preceding such date for which a closing price is reported. If
the grant of restricted stock or of RSUs is denominated in dollars, the number of shares of
restricted stock or RSUs that are granted will generally be calculated by dividing the dollar value of
the approved award by the average closing market price on The New York Stock Exchange of one
share of our Class A common stock over the trailing 30-day period ending (i) five business days
immediately prior to the effective date of grant for grants made pursuant to offer letters or award
letters issued April 1, 2019 or later or (ii) on the last day of the month immediately prior to the
month of the grant date for grants made pursuant to offer letters or award letters issued prior to
April 1, 2019, with such total number of shares to be granted per recipient rounded up to the
nearest whole share.

• Our board of directors or our compensation and talent management committee may delegate to a
committee comprising at least two of our executive officers all or part of the authority with respect
to the granting of certain equity awards to employees (other than to such delegates), subject to
certain limitations and requirements. Our board of directors and compensation and talent
management committee have currently delegated authority to a subcommittee consisting of our
Chief Operating Officer, Chief People Officer, Chief Legal Officer and Senior Vice President,
Finance, to grant, without any further action required by the compensation and talent management
committee, equity awards to all employees, except our executive officers, senior vice presidents and
vice presidents. The purpose of this delegation of authority is to enhance the flexibility of equity
award administration and to facilitate the timely grant of equity awards to non-management
employees, particularly new employees, within specified limits approved from time to time by the

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compensation and talent management committee. As part of its oversight function, the
compensation and talent management committee will review the list of grants made by the
subcommittee at each regularly scheduled in-person meeting.

Death Equity Acceleration Policy

In December 2020, the compensation and talent management committee approved a policy providing
that upon the termination due to death of an employee’s or non-employee director’s employment or other
service relationship with the Company or any of its subsidiaries, any then outstanding equity awards held
by the individual that vest solely based on continued employment or service will automatically receive two
years of supplemental vesting. The policy applies both to awards granted prior to the adoption of the
policy, as well as awards granted thereafter.

Policy Prohibiting Hedging and Pledging of Equity Securities

Our Amended and Restated Insider Trading Policy prohibits our employees, including our executive

officers, and the non-employee members of our board of directors from engaging in any short sale and
from buying or selling puts, calls, other derivative securities or any derivative securities that provide the
economic equivalent of ownership of any of our securities or an opportunity, direct or indirect, to profit
from any change in the value of our securities or engage in any other hedging transaction with respect to
our securities, at any time. In addition, our Insider Trading Policy prohibits our employees, including our
executive officers, and the non-employee members of our board of directors from using our securities as
collateral in a margin account or from pledging our securities as collateral for a loan. Mr. Chew, our
former Chief Product Officer, ceased to be employed by us as of May 17, 2021 and entered into pledging
arrangements after his employment ceased with us.

Stock Ownership Policy

To further align the interests of our executive officers with those of our stockholders and to promote a

long-term perspective in managing our Company, in April 2018, we adopted a stock ownership policy for
our Chief Executive Officer and executive officers subject to Section 16 of the Exchange Act (“Section 16
Officers”), including each of our named executive officers. We amended and restated this stock ownership
policy in September 2020 and in March 2022. In March 2022, we revised the stock ownership policy to,
among other things, increase the salary-multiple for our named executive officers (other than our Chief
Executive Officer) from one time to three times his or her annual base salary, eliminate pre-established
share number thresholds, and eliminate vested but unexercised in-the-money options from the share
ownership calculation.

Our stock ownership policy, as amended, requires each named executive officer to acquire and hold a

number of shares of our common stock equal in value to a multiple of such named executive officer’s
annual base salary until he or she ceases to be our Chief Executive Officer or a Section 16 Officer, as
applicable. The multiple for our Chief Executive Officer is six times his annual base salary and the multiple
for our other named executive officers is three times his or her annual base salary. For purposes of our
stock ownership policy, we only count directly and beneficially owned shares, including shares purchased
through our ESPP or Section 401(k) Plan, if applicable, and shares underlying vested RSUs that are held
or deferred. Each named executive officer has five years from the later of his or her designation as our
Chief Executive Officer or Section 16 Officer, as applicable, or from the original effective date of the
policy to obtain the required ownership level.

Compensation Recovery Policy

We intend to adopt a compensation recovery (“clawback”) policy once the SEC adopts final rules

implementing the requirement of Section 954 of the Dodd-Frank Wall Street Reform and Consumer
Protection Act.

Tax and Accounting Considerations

Deductibility of Executive Compensation

Under Section 162(m) of the Internal Code (“Section 162(m)”), compensation paid to each of the

Company’s “covered employees” that exceeds $1 million per taxable year is generally non-deductible.
Although our compensation and talent management committee will continue to consider tax implications
as one factor in determining executive compensation, it also looks at other factors in making its decisions
and retains the flexibility to provide compensation for our executive officers in a manner consistent with
the goals of our executive compensation program and the best interests of our stockholders, which may
include providing for compensation that is not deductible by us due to the deduction limit under
Section 162(m).

Taxation of “Parachute” Payments

Sections 280G and 4999 of the Code provide that executive officers and directors who hold significant

equity interests and certain other service providers may be subject to significant additional taxes if they
receive payments or benefits in connection with a change in control of the Company that exceeds certain
prescribed limits, and that the Company (or a successor) may forfeit a deduction on the amounts subject to
this additional tax. We have not agreed to provide any executive officer, including any named executive
officer, with a “gross-up” or other reimbursement payment for any tax liability that the executive officer
might owe as a result of the application of Sections 280G or 4999 of the Code.

Section 409A of the Internal Revenue Code

Section 409A of the Code imposes additional significant taxes in the event that an executive officer,

director or service provider receives “deferred compensation” that does not satisfy the requirements of
Section 409A of the Code. Although we do not maintain a traditional nonqualified deferred compensation
plan for our executive officers, Section 409A of the Code does apply to certain severance arrangements,
bonus arrangements and equity awards, and we have structured all such arrangements and awards in a
manner to either avoid or comply with the applicable requirements of Section 409A of the Code. For our
non-employee directors, we provide a Non-Employee Directors’ Deferred Compensation Program, which
has been structured to comply with the applicable requirements of Section 409A of the Code.

Accounting for Stock-Based Compensation

We follow the Financial Accounting Standard Board’s Accounting Standards Codification Topic 718
(“FASB ASC Topic 718”) for our stock-based compensation awards. FASB ASC Topic 718 requires us to
measure the compensation expense for all share-based payment awards made to our employees and
non-employee members of our board of directors, including options to purchase shares of our common stock
and other stock awards, based on the grant date fair value of these awards. This cost is recognized as an
expense following the straight-line attribution method over the requisite service period. This calculation is
performed for accounting purposes and reported in the executive compensation tables required by the
federal securities laws, even though the recipient of the awards may never realize any value from such awards.

Compensation Risk Assessment

In consultation with management and Compensia, our compensation and talent management

committee’s independent compensation consultant, in March 2021, our compensation and talent
management committee assessed our compensation plans, policies and practices for named executive
officers and other employees and concluded that they do not create risks that are reasonably likely to have
a material adverse effect on us. This risk assessment included, among other things, a review of our cash
and equity incentive-based compensation plans to ensure that they are aligned with our performance goals
and overall target total direct compensation to ensure an appropriate balance between fixed and variable
pay components. Our compensation and talent management committee conducts this assessment annually.

P
r
o
x
y

Summary Compensation Table

The following table provides information regarding the total compensation, for services rendered in

all capacities, that was paid to or earned by our named executive officers during the fiscal years ended
December 31, 2019, 2020 and 2021.

Name and principal position

Year

Salary
($)

Bonus
($)

Stock
awards
($)(1)

Jeff Lawson . . . . . . . . . . . . . . . . . 2021 133,990
2020 133,700
2019 133,700

Chief Executive Officer and
Chairperson

6,926,889
— 6,753,009
— 5,670,863

Option
awards
($)(1)

7,000,586
6,741,058
6,068,675

Khozema Shipchandler(5)

Chief Operating Officer and
Principal Financial Officer

. . . . . 2021 744,362
2020 622,465
2019 567,000

— 5,909,608(6)
— 3,452,811
—
—

6,021,278(6)
3,446,740
—

Eyal Manor(7)

. . . . . . . . . . . . . . .

2021

86,538

— 33,687,986(8)

8,098,119(8)

Chief Product Officer

Non-
equity
incentive
compensation
($)

All other
compensation
($)

Total
($)

—
—
—

—

564,280(2)
159,105(3)
419,338(4)

14,625,745
13,786,872
12,292,576

6,736(2)
8,525(3)
7,000(4)

12,682,764
7,530,541
574,000

2,077(2)

41,874,814

Marc Boroditsky(9) . . . . . . . . . . .

2021 473,600

— 7,737,831

7,765,427

597,503(10)

6,777(2)

16,581,138

Chief Revenue Officer

Dana R. Wagner(11)
Chief Legal Officer

. . . . . . . . . .

2021

11,538 250,000

—

George Hu . . . . . . . . . . . . . . . . . 2021 735,681
2020 669,358
2019 610,000

Former Chief Operating
Officer

— 3,678,482
— 3,445,617
— 3,780,539

3,717,702
3,439,574
4,045,783

Chee Chew(12) . . . . . . . . . . . . . . . 2021 205,515
2020 460,869
2019 395,769

Former Chief Product Officer

— 3,678,482(13)
— 4,292,780
— 9,445,072

3,717,702(13)
4,285,209
13,787,047

—

—
—
—

—

261,569

4,845(2)
9,650(3)
7,696(4)

8,137,490
7,564,199
8,444,018

4,845(2)
10,357(3)
7,000(4)

7,606,825
9,049,215
23,634,888

(1) The amounts reported in this column represent the aggregate grant date fair value of the RSUs or stock options, as
applicable, awarded to the named executive officers in the fiscal years ended December 31, 2019, 2020 and 2021, as
applicable, calculated in accordance with FASB ASC Topic 718. Such aggregate grant date fair values do not take into
account any estimated forfeitures related to service-vesting conditions. The valuation assumptions used in determining
such amounts are described in the Notes to our Consolidated Financial Statements included in our Annual Report on
Form 10-K filed with the SEC on February 22, 2022. The amounts reported in this column reflect the accounting cost for
RSUs or stock options, as applicable, and do not correspond to the actual economic value that may be received by the
named executive officers upon the vesting or settlement of the RSUs or upon exercise of the stock options or sale of the
shares of common stock underlying such stock options.

(2) For Mr. Lawson, consists of a reimbursement from us for a $280,000 filing fee incurred under HSR related to

Mr. Lawson’s stock ownership and $5,595 and $275,335, respectively, for the related legal fees and tax gross-up, as well as
$3,350 for our matching contributions to his Section 401(k) account in 2021. For Messrs. Shipchandler, Manor,
Boroditsky, Hu and Chew, consists of our Section 401(k) matching contributions to their respective Section 401(k)
accounts in 2021.

(3) For Mr. Lawson, consists of $113 for supplemental long-term disability insurance premiums, $3,358 for our matching
contributions to his Section 401(k) account in 2020, $600 for a work from home stipend and $155,034 for personal
security costs related to increased potential unrest around the 2020 presidential election. For Mr. Shipchandler, consists
of $300 for supplemental long-term disability insurance premiums, $7,365 for our matching contributions to his
Section 401(k) account in 2020, $600 for a work from home stipend, $200 for a tax related stipend and $60 for a gym and
wellness reimbursement. For Mr. Hu, consists of $300 for supplemental long-term disability insurance premiums, $8,550
for our matching contributions to his Section 401(k) account in 2020, $600 for a work from home stipend and $200 for a
tax related stipend. For Mr. Chew, consists of $300 for supplemental long-term disability insurance premiums, $8,550 for
our matching contributions to his Section 401(k) account in 2020, $600 for a work from home stipend, $200 for a tax
related stipend and $707 for a trip related reward payment.

(4) For Mr. Lawson, consists of a reimbursement from us for a $280,000 filing fee incurred under HSR related to

Mr. Lawson’s stock ownership, $6,723 and $128,517, respectively, for the related legal fees and tax gross-up, $730 for
supplemental long-term disability insurance premiums, as well as $3,368 for our matching contributions to his
Section 401(k) account in 2019. For Mr. Shipchandler, consists of $7,000 for our matching contributions to his
Section 401(k) account in 2019. For Mr. Hu, consists of $696 for supplemental long-term disability insurance premiums,
as well as $7,000 for our matching contributions to his Section 401(k) account in 2019. For Mr. Chew, consists of $7,000
for our matching contributions to his Section 401(k) account in 2019.

(5) The table reflects Mr. Shipchandler’s increased base salary and additional equity awards in connection with his

appointment as Chief Operating Officer in October 2021.

(6) This amount includes one-time equity awards in connection with Mr. Shipchandler’s appointment as Chief Operating

Officer as follows: (a) RSUs with a grant date fair value of $2,231,126 and (b) options with a grant date fair value of
$2,303,576.

(7) Mr. Manor was appointed our Chief Product Officer effective November 15, 2021 and an executive officer effective
December 15, 2021. He was not employed by us in 2019 and 2020. Mr. Manor’s 2021 base salary was prorated to his
employment start date.

(8) This amount reflects a one-time new hire equity award pursuant to Mr. Manor’s employment offer letter. For more

information, see “Grants of Plan-Based Awards Table” below.

(9) Mr. Boroditsky was appointed an executive officer effective December 15, 2021 and was not a named executive officer in

2019 and 2020. On April 28, 2022, Mr. Boroditsky notified us of his intention to resign from his position as Chief
Revenue Officer, effective immediately. Mr. Boroditsky’s last day of employment will be August 19, 2022.

(10) This amount reflects commissions Mr. Boroditsky received in 2021 pursuant to our Sales Commission Plan.

(11) Mr. Wagner was appointed our Chief Legal Officer effective December 13, 2021 and an executive officer effective

December 15, 2021. He was not employed by us in 2019 and 2020. Mr. Wagner received a one-time sign-on bonus of
$250,000, and his 2021 base salary was prorated to his employment start date.

(12) Mr. Chew was appointed our Chief Product Officer on January 14, 2019 and resigned effective May 17, 2021. Mr. Chew’s

2019 and 2021 base salaries were prorated for the portion of 2019 and 2021, respectively, during which he was employed
by us.

(13) All equity awards granted to Mr. Chew in fiscal year 2021 were forfeited upon his resignation in May 2021.

Grants of Plan-Based Awards Table

The following table sets forth certain information with respect to all plan-based awards granted to our

named executive officers during the fiscal year ended December 31, 2021.

Name

Type of Award

Estimated Future Payouts
Under Equity Incentive Plan
Awards

Grant
Date

Threshold
($)

Target
($)

Maximum
($)

All Other
Stock
Awards:
Number of
Shares of
Stock or
Units (#)

All Other
Option
Awards:
Number of
Securities
Underlying
Options
(#)

Exercise
or Base
Price of
Option
Awards
($/sh)

Grant Date
Fair Value
of Stock and
Option
Awards
($)(1)

P
r
o
x
y

Time-Based RSUs

Jeff Lawson . . . . . . . . . . . . . Time-Based Stock Option

Khozema Shipchandler . . . Time-Based Stock Option

2/25/2021
2/25/2021
2/25/2021
Time-Based RSUs
2/25/2021
Time-Based Stock Option 11/11/2021
11/11/2021
Time-Based RSUs
Eyal Manor . . . . . . . . . . . . . Time-Based Stock Option 12/20/2021
12/20/2021
4/20/2021
Time-Based RSUs
4/20/2021
Time-Based Stock Option 11/11/2021
11/11/2021
Time-Based RSUs
—
2/25/2021
2/25/2021
2/25/2021
2/25/2021

Dana R. Wagner(4)
George Hu . . . . . . . . . . . . . . Time-Based Stock Option

Chee Chew(5) . . . . . . . . . . . . Time-Based Stock Option

Marc Boroditsky . . . . . . . . . Time-Based Stock Option

Time-Based RSUs

. . . . . . . —

—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—

—
18,345(3)
—
9,742(3)
—
7,487(3)
—

125,444(3)

—
7,089(3)
—
17,220(3)
—
—
9,742(3)
—
9,742(3)

34,132(2)
—
18,126(2)
—
13,565(2)
—
54,428(2)
—
12,821(2)
—
32,373(2)
—
—
18,126(2)
—
18,126(2)
—

377.59
—
377.59
—
298.00
—
268.55

367.65
—
298.00
—
—
377.59
—
377.59
—

7,000,586
6,926,889
3,717,702
3,678,482
2,303,576
2,231,126
8,098,119
— 33,687,986
2,606,861
2,606,271
5,158,566
5,131,560
—
3,717,702
3,678,482
3,717,702
3,678,482

(1) The amounts reported in this column represent the aggregate grant date fair value of the RSUs and stock options, as applicable, granted to the

named executive officer in the fiscal year ended December 31, 2021, calculated in accordance with FASB ASC Topic 718. Such aggregate grant date
fair values do not take into account any estimated forfeitures related to service-vesting conditions. The valuation assumptions used in determining
such amounts are described in the Notes to our Consolidated Financial Statements included in our Annual Report on Form 10-K filed with the SEC
on February 22, 2022. The amounts reported in this column do not correspond to the actual economic value that may be received by the named
executive officers upon the vesting or settlement of the RSUs or the exercise of the stock options or sale of the shares of common stock underlying
such stock options, as applicable.

(2) The stock options are subject to time-based vesting, as described in the footnotes to the “Outstanding Equity Awards at Fiscal Year-End Table”

below.

(3) The RSUs are subject to time-based vesting, as described in the footnotes to the “Outstanding Equity Awards at Fiscal Year-End Table” below.

(4) Mr. Wagner was appointed our Chief Legal Officer effective December 13, 2021 and did not receive any equity awards in 2021. Mr. Wagner was

granted a new hire RSU award in January 2022 in accordance with his employment offer letter. Please see “Employment Agreements or Offer
Letters with Named Executive Officers” below for additional information.

(5) All equity awards granted to Mr. Chew in fiscal year 2021 were forfeited upon his resignation in May 2021.

Outstanding Equity Awards at Fiscal Year-End Table

The following table sets forth information regarding outstanding equity awards held by our named
executive officers as of December 31, 2021. Except as described below, all stock options and RSUs are
subject to certain vesting acceleration provisions as provided in the applicable Executive Severance Plan.

Option Awards(1)(2)

Stock Awards(1)(2)

Number of
securities
underlying
unexercised
options (#)
exercisable

Number of
securities
underlying
unexercised
options (#)
unexercisable

Grant
date

Equity
incentive
plan awards:
number of
securities
underlying
unexercised
unearned
options (#)

Option
exercise
price ($)(3)

Option
expiration
date

Number
shares or
units of
stock that
have not
vested (#)

Market
value of
shares or
units of
stock that
have not
vested ($)(4)

Name

Marc Boroditsky . . . . . . . . . . . . .

Jeff Lawson . . . . . . . . . . . . . . . . . 12/31/2015
2/10/2017
2/20/2018
1/31/2019
2/22/2020
2/25/2021
2/20/2018
1/31/2019
2/22/2020
2/25/2021
Khozema Shipchandler . . . . . . . 11/01/2018
2/22/2020
2/25/2021
11/11/2021
11/01/2018
2/22/2020
2/25/2021
11/11/2021
Eyal Manor . . . . . . . . . . . . . . . . . 12/20/2021
12/20/2021
3/12/2015
4/20/2018
2/20/2019
2/20/2020
4/20/2021
11/11/2021
4/20/2018
2/20/2019
2/20/2020
8/20/2020
4/20/2021
11/11/2021
—
2/20/2018
1/31/2019
2/22/2020
2/25/2021
02/20/2018
02/21/2018
01/31/2019
02/22/2020
02/25/2021
—

. . . . . . . . . .
Dana R. Wagner(31)
George Hu . . . . . . . . . . . . . . . . .

Chee Chew(32) . . . . . . . . . . . . . . .

316,667(5)
163,890(5)
195,106
73,798
37,873
—
—
—
—
—
5,181
4,841
—
—
—
—
—
—
—
—
46,250(5)
20,533
17,580
8,943
2,713
1,348
—
—
—
—
—
—
—
2,005(5)
24,599(5)
4,831(5)
—
—
—
—
—
—
—

—
—
8,483(6)
36,899(7)
76,894(8)
34,132(9)
—
—
—
—
36,667(14)
39,317(8)
18,126(9)
13,565(15)
—
—
—
—
54,428(18)
—

2,621(20)
7,240(21)
10,571(22)
10,108(23)
31,025(24)
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—

—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—

—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—
—

10.09
31.96
33.01
111.32
117.94
377.59
—
—
—
—
76.63
117.94
377.59
298.00
—
—
—
—
268.55
—
7.07
41.22
116.30
126.71
367.65
298.00
—
—
—
—
—
—
—
33.01
111.32
117.94
377.59
—
—
—
—
—
—

12/30/2025
2/9/2027
2/19/2028
1/30/2029
2/21/2030
2/24/2031
—
—
—
—
10/31/2028
2/21/2030
2/24/2031
11/11/2031
—
—
—
—
12/20/2031
—
3/11/2025
4/19/2028
2/19/2029
2/20/2030
4/20/2031
11/11/2031(24)

—
—
—
—
—
—
—
2/19/2028
1/30/2029
2/21/2030
2/24/2031
—
—
—
—
—
—

—
—
—
—
—
—
6,363(10)
16,981(11)
38,363(12)
18,345(13)
—
—
—
—
27,721(16)
19,615(12)
9,742(13)
7,487(17)
—

125,444(19)

—
—
—
—
—
—
1,573(25)
3,572(26)
5,476(27)
24,210(28)
5,759(29)
15,068(30)
—
—
—
—
—
6,014(10)
3,007(10)
11,321(11)
19,575(12)
9,742(13)
—

—
—
—
—
—
—
1,675,632
4,471,777
10,102,512
4,830,972
—
—
—
—
7,300,048
5,165,414
2,565,458
1,971,627
—
33,034,423
—
—
—
—
—
—
414,234
940,650
1,442,050
6,375,461
1,516,575
3,968,007
—
—
—
—
—
1,583,727
791,863
2,981,272
5,154,881
2,565,458
—

(1)

Equity awards granted prior to June 21, 2016 were granted pursuant to our 2008 Stock Option Plan (as amended and restated, the “2008 Plan”).
Each stock option under the 2008 Plan is immediately exercisable. Equity awards granted on or after June 21, 2016 were granted pursuant to our
2016 Plan.

(2) Unless otherwise described in the footnotes below, the vesting of each equity award on a vesting date is subject to the applicable named executive

officer’s continued employment with the Company through such vesting date.

(3)

(4)

(5)

(6)

(7)

(8)

(9)

This column represents the fair market value of a share of our common stock on the date of the grant, as determined by the administrator of our
2008 Plan or 2016 Plan, as applicable.

This column represents the aggregate fair market value of the shares underlying the RSUs as of December 31, 2021, based on the closing price of
our Class A common stock, as reported on The New York Stock Exchange, of $263.34 per share on December 31, 2021.

The shares subject to the stock option are fully vested.

The shares subject to the stock option vest as follows: 1/48 of the shares vested on March 15, 2018 and the remaining shares subject to the option
vest in equal monthly installments over the following four years.

The shares subject to the stock option vest as follows: 33% of the shares subject to the stock option vested on December 31, 2020, 33% of the
shares subject to the stock option vest on December 31, 2021 and 34% of the shares subject to the stock option vest on December 31, 2022.

The shares subject to the stock option vest as follows: 33% of the shares subject to the stock option shall vest in equal quarterly installments
between the first and second anniversaries of December 31, 2019, 33% of the shares subject to the stock option shall vest in equal quarterly
installments between the second and third anniversaries of December 31, 2019 and 34% of the shares subject to the stock option shall vest in
equal quarterly installments between the third and fourth anniversaries of December 31, 2019.

The shares subject to the stock option vest as follows: 33% of the stock option shall vest in equal quarterly installments between the first and
second anniversaries of December 31, 2020, 33% of the stock option shall vest in equal quarterly installments between the second and third
anniversaries of December 31, 2020 and 34% of the stock option shall vest in equal quarterly installments between the third and fourth
anniversaries of December 31, 2020.

(10) The RSUs vest as follows: 1/16 of the RSUs vested on May 15, 2018 and 1/16 of the RSUs vest quarterly for the next 15 quarters on August 15,

November 15, February 15 and May 15, as applicable.

(11) The RSUs vest as follows: 33% of the RSUs vested on December 31, 2020, 33% of the RSUs shall vest on December 31, 2021 and 34% of the

RSUs shall vest on December 31, 2022.

(12) The RSUs vest as follows: 33% of the RSUs shall vest in equal quarterly installments between the first and second anniversaries of December 31,

2019, 33% of the RSUs shall vest in equal quarterly installments between the second and third anniversaries of December 31, 2019 and 34% of the
RSUs shall vest in equal quarterly installments between the third and fourth anniversaries of December 31, 2019.

(13) The RSUs shall vest as follows: 33% shall vest in equal quarterly installments between the first and second anniversaries of December 31, 2020,

33% shall vest in equal quarterly installments between the second and third anniversaries of December 31, 2020 and 34% shall vest in equal
quarterly installments between the third and fourth anniversaries of December 31, 2020.

(14) The shares subject to the stock option vest as follows: 25% of the shares subject to the stock option vested on November 1, 2019, and the

remaining shares subject to the stock option vest in equal monthly installments over the following three years.

(15) The shares subject to the stock option vest as follows: 33% of the stock option shall vest in equal quarterly installments between the first and
second anniversaries of December 31, 2021, 33% of the stock option shall vest in equal quarterly installments between the second and third
anniversaries of December 31, 2021 and 34% of the stock option shall vest in equal quarterly installments between the third and fourth
anniversaries of December 31, 2021.

(16) The RSUs vest as follows: 25% of the RSUs vested on November 15, 2019 and the remaining RSUs vest in equal quarterly installments over the

following three years, in each case on February 15, May 15, August 15 and November 15, as applicable.

(17) The RSUs shall vest as follows: 33% shall vest in equal quarterly installments between the first and second anniversaries of December 31, 2021,

33% shall vest in equal quarterly installments between the second and third anniversaries of December 31, 2021 and 34% shall vest in equal
quarterly installments between the third and fourth anniversaries of December 31, 2021.

(18) The shares subject to the option vest as follows: 3/48th of the option shall vest on February 15, 2022 and the remaining shares subject to the option

shall vest in equal monthly installments over the remaining 45 months.

(19) The RSUs vest as follows: 1/16th of the RSUs shall vest on February 15, 2022 and the remaining RSUs shall vest in equal quarterly installments on

February 15, May 15, August 15 and November 15, as applicable, for the remaining 15 quarters.

(20) This award originally represented an option to purchase 25,154 shares, of which 2,000 options have been exercised. The shares subject to this

option vest in 48 equal monthly installments, with the first installment on June 15, 2018.

(21) The shares subject to this option vest in 48 equal monthly installments, with the first installment on March 15, 2019.

(22) The shares subject to this option vest in 48 equal monthly installments, with the first installment on March 15, 2020.

(23) The shares subject to this option vest as follows: 3/48th shall vest on May 15, 2021 and the remaining options shall vest in equal installments over

the remaining 45 months.

(24) The shares subject to this option vest in 24 equal monthly installments, with the first installment on December 11, 2021. The deadline to exercise

the options is three years from the date of separation from service due to termination by the company without cause or by Mr. Boroditsky for
good reason, as such terms are defined in the Boroditsky Letter (defined below), or 10 years from the date of the grant, whichever comes first.

(25) The RSUs vest as follows: 1/48th of the RSUs shall vest on June 15, 2018 and the remaining RSUs shall vest in equal monthly installments over

the following four years.

(26) The RSUs vest as follows: 1/48th of the RSUs shall vest on March 15, 2019 and the remaining RSUs shall vest in equal monthly installments over

the following four years.

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(27) The RSUs vest as follows: 1/48th of the RSUs shall vest on March 15, 2020 and the remaining RSUs shall vest in equal monthly installments over

the following four years.

(28) The RSUs vest as follows: 1/48th of the RSUs shall vest on September 15, 2020 and the remaining RSUs shall vest in equal monthly installments

over the following four years.

(29) The RSUs vest as follows: 1/48th of the RSUs shall vest on March 15, 2021 and the remaining RSUs shall vest in equal monthly installments over

the following four years.

(30) The RSUs vest as follows: 1/8th of the RSU shall vest on November 15, 2021 and the remaining RSUs shall vest in equal quarterly installments on

February 15, May 15, August 15 and November 15 over the remaining two years.

(31) Mr. Wagner was appointed our Chief Legal Officer effective December 13, 2021 and had no outstanding equity awards as of December 31, 2021.

(32) Mr. Chew resigned in May 2021 and had no outstanding equity awards as of December 31, 2021.

Option Exercises and Stock Vested Table

The following table presents, for each of our named executive officers, the shares of our common
stock that were acquired upon the exercise of stock options and vesting of RSUs and the related value
realized during the fiscal year ending December 31, 2021.

Name

Jeff Lawson . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Khozema Shipchandler . . . . . . . . . . . . . . . . . . . . . . . . . . .
Eyal Manor(4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marc Boroditsky . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Dana R. Wagner(4)
George Hu . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chee Chew . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Option Awards

Stock Awards

Number of
Shares
Acquired
on Exercise
(#)

—
49,994
—
—
—
744,735
146,639

Value
Realized on
Exercise
($)(1)(2)

Number of
Shares
Acquired on
Vesting
(#)

— 64,963
37,382
13,189,362
—
—
— 29,957
—
—
63,290
186,370,597
13,154
38,308,200

Value
Realized on
Vesting
($)(1)(3)

21,159,499
12,867,199
—
10,375,087
—
21,518,443
4,693,529

(1) These values assume that the fair market value of the Class B common stock underlying certain of the stock options and RSUs, which is not listed or
approved for trading on or with any securities exchange or association, is equal to the fair market value of our Class A common stock. Each share of
Class B common stock is convertible into one share of Class A common stock at any time at the option of the holder or upon certain transfers of
such shares.

(2) The aggregate value realized upon the exercise of a stock option represents the difference between the aggregate market price of the shares of our

Class A common stock, exercised on the date of exercise and the aggregate exercise price of the stock option.

(3) The aggregate value realized upon the vesting and settlement of the RSUs represents the aggregate market price of the shares of our Class A

common stock or Class B common stock (which is assumed to be equal to our Class A common stock as described in footnote (1) above), as
applicable, that vested on the date of settlement.

(4) Messrs. Manor and Wagner joined us in 2021 and have not vested in any equity awards.

Employment Agreements or Offer Letters with Named Executive Officers

We have entered into employment offer letters or promotion letters with each of our named executive
officers, except our Chief Executive Officer, in connection with his or her employment with us that provide
for, among other things, annual base salary and grants of equity awards. For a summary of the material
terms and conditions of these arrangements, as well as an estimate of the potential payments and/or
benefits payable to our named executive officers under these arrangements, see the description below and
the section titled “—Potential Payments Upon Termination or Change in Control” below.

Jeff Lawson

We have not entered into an employment offer letter or employment agreement with Mr. Lawson.

Khozema Shipchandler

On August 22, 2018, we entered into an employment offer letter with Mr. Shipchandler, who then

served as our Chief Financial Officer. The employment offer letter provided for Mr. Shipchandler’s
“at-will” employment and set forth his initial annual base salary and an initial stock option and RSU grant,
as well as his eligibility to participate in our benefit plans generally. Mr. Shipchandler is subject to our
standard employment, confidential information, invention assignment and arbitration agreement. Effective
October 27, 2021, Mr. Shipchandler was appointed Chief Operating Officer. In connection therewith, the
compensation and talent management committee of the board of directors approved an increase to
Mr. Shipchandler’s base salary and stock option and RSU awards, as further described under “2021
Summary Compensation Table” and “Grants of Plan-Based Awards Table.” No other changes were made
to Mr. Shipchandler’s existing compensatory or severance arrangements.

Eyal Manor

On October 8, 2021, we entered into an employment offer letter with Mr. Manor, who currently serves
as our Chief Product Officer. The employment offer letter provided for Mr. Manor’s “at-will” employment
and set forth his initial annual base salary and an initial RSU and option grant, as well as his eligibility to
participate in our benefit plans generally. Mr. Manor is subject to our standard employment, confidential
information, invention assignment and arbitration agreement.

Dana R. Wagner

On October 5, 2021, we entered into an employment offer letter with Mr. Wagner, who currently

serves as our Chief Legal Officer. The employment offer letter provided for Mr. Wagner’s “at-will”
employment and set forth his initial annual base salary, sign-on bonus, and initial RSU award, which was
granted in January 2022, as well as his eligibility to participate in our benefit plans generally. Mr. Wagner
is subject to our standard employment, confidential information, invention assignment and arbitration
agreement.

Marc Boroditsky

On October 25, 2021, we entered into a promotion letter with Mr. Boroditsky in connection with his
expanded role in his position as our Chief Revenue Officer (“Boroditsky Letter”). The Boroditsky Letter
provided for Mr. Boroditsky’s “at-will” employment and set forth his annual base salary and stock option
and RSU grants, as well as his eligibility to participate in our benefit plans generally. Mr. Boroditsky is
subject to our standard employment, confidential information, invention assignment and arbitration
agreement. On April 28, 2022, Mr. Boroditsky notified us of his intention to resign from his position as
Chief Revenue Officer, effective immediately. Mr. Boroditsky’s last day of employment will be August 19,
2022. Mr. Boroditsky’s current salary, benefits and stock option and restricted stock unit award vesting
schedules will remain in effect until August 19, 2022, subject to his continued employment through such
date.

George Hu

Mr. Hu resigned as Chief Operating Officer effective October 27, 2021, following which he remained

at the Company as a strategic advisor to help with the transition until January 3, 2022. Mr. Hu’s then-
current salary, benefits and stock option and restricted stock unit award vesting schedules remained in
effect until January 3, 2022.

Potential Payments Upon Termination or Change in Control

Executive Severance Plans

We maintain three separate executive severance plans (i.e., the Chief Executive Officer Severance

Plan and Key Executive Severance Plan, collectively the “Executive Severance Plans,” and the VP
Severance Plan). We do not provide for any severance or change in control payments or benefits in our
named executive officers’ employment offer letters (except for limited vesting acceleration provisions in
our Chief Revenue Officer’s promotion letter). Each of our named executive officers, including our Chief

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Executive Officer and Chief Operating Officer and Principal Financial Officer, is a participant in the
applicable Executive Severance Plan, as further described below. The Executive Severance Plans provide
for certain payments and benefits in the event of a termination of employment, including an involuntary
termination of employment in connection with a change in control of the Company.

Our Executive Severance Plans provide that upon a termination of employment by us for any reason
other than for “cause” (as defined in the applicable Executive Severance Plan), death or disability outside
of the change in control period (i.e., the period beginning three months prior to and ending 12 months
after, a “change in control,” as defined in the applicable Executive Severance Plan), an eligible participant
will be entitled to receive, subject to the execution and delivery of an effective release of claims in our
favor, (i) a lump sum cash payment equal to nine months of base salary for our Chief Executive Officer,
and six months of base salary for our other named executive officers, and (ii) a monthly cash payment for
up to nine months for our Chief Executive Officer and up to six months for our other named executive
officers equal to the monthly contribution we would have made to provide health insurance to the named
executive officer if he or she had remained employed by us. Pursuant to the CEO Severance Plan, our
Chief Executive Officer is also entitled to such benefits upon a resignation of employment for “good
reason” (as defined in the CEO Severance Plan) outside of the change in control period. In addition, upon
a (i) termination of employment by us other than due to cause, death or disability or (ii) a resignation of
employment for “good reason”, in each case, outside of the change in control period, our Chief Executive
Officer will be entitled to 12 months of acceleration of vesting for outstanding and unvested time-based
equity awards.

The Executive Severance Plans also provide that upon a (i) termination of employment by us other

than due to cause, death or disability or (ii) a resignation of employment for “good reason” (as defined in
the applicable Executive Severance Plan), in each case, within the change in control period, an eligible
participant will be entitled to receive, in lieu of the payments and benefits above and subject to the
execution and delivery of an effective release of claims in our favor, (1) a lump sum cash payment equal to
18 months of base salary for our Chief Executive Officer and 12 months of base salary for our other named
executive officers, (2) a monthly cash payment for up to 18 months for our Chief Executive Officer and up
to 12 months for our other named executive officers equal to the monthly contribution we would have
made to provide health insurance to the named executive officer if he or she had remained employed by
us, and (3) full accelerated vesting of all outstanding and unvested equity awards held by our named
executive officers; provided, that the performance conditions applicable to any stock-based awards subject
to performance conditions will be deemed satisfied at the target level specified in the terms of the
applicable award agreement.

The payments and benefits provided under the Executive Severance Plans in connection with a
change in control may not be eligible for a federal income tax deduction by us pursuant to Section 280G of
the Code. These payments and benefits may also subject an eligible participant, including the named
executive officers, to an excise tax under Section 4999 of the Code. If the payments or benefits payable to
an eligible participant in connection with a change in control would be subject to the excise tax imposed
under Section 4999 of the Code, then those payments or benefits will be reduced if such reduction would
result in a higher net after-tax benefit to him or her.

Other Change in Control and Severance Arrangements

The following table presents information concerning estimated payments and benefits that would be
provided in the circumstances described above for each of the named executive officers who were serving
as named executive officers as of the end of the fiscal year ending December 31, 2021. Messrs. Hu and
Chew resigned as of October 27, 2021 and May 17, 2021, respectively, and received no compensation in
connection with their terminations.

The payments and benefits set forth below are estimated assuming that the termination or change in

control event occurred on the last business day of our fiscal year ending December 31, 2021 using the

closing market price of our stock on that date. Actual payments and benefits could be different if such
events were to occur on any other date or at any other price or if any other assumptions are used to
estimate potential payments and benefits.

Qualifying Termination Not in Connection
with a Change in Control(1)

Qualifying Termination in Connection
with a Change in Control(2)

Name

Cash
Severance
($)

Continued
Benefits
($)

Equity
Acceleration
($)(3)(4)

Total
($)

Cash
Severance
($)

Continued
Benefits
($)

Equity
Acceleration
($)(3)(5)

Jeff Lawson . . . . . . . . . . . .
Khozema Shipchandler . . .
Eyal Manor . . . . . . . . . . . .
Marc Boroditsky . . . . . . . .
Dana R. Wagner . . . . . . . .

100,500(6)
550,000(11)
450,000(11)
250,000(11)
300,000(11)

14,306(7)
9,367(12)
711(12)
9,673(12)
332(12)

—
—

25,787,225(8) 25,902,030
559,367
450,711
3,968,007(15) 4,227,680
300,332

—

201,000(9)

28,611(10)
1,100,000(13) 18,733(14)
900,000(13)
1,422(14)
500,000(13) 19,346(14)
665(14)
600,000(13)

39,824,557
29,565,334
33,034,423
17,748,040
—

Total
($)

40,054,168
30,684,067
33,935,845
18,267,368
600,665

(1) A “qualifying termination” means a termination other than due to cause, death or disability (or a resignation for good reason, for

Mr. Lawson) and “not in connection with a change in control” means outside of the change in control period.

(2) A “qualifying termination” means a termination other than due to cause, death or disability or a resignation for good reason and
“in connection with a change in control” means within the change in control period. Assumes that in connection with the change
in control, outstanding equity awards would have otherwise been assumed, substituted or continued by the successor entity.

(3) Represents the market value of the shares underlying the stock options and RSUs as of December 31, 2021, based on the closing
price of our Class A common stock, as reported on The New York Stock Exchange, of $263.34 per share on December 31, 2021.

(4) See “—Other Compensation Policies and Practices—Death Equity Acceleration Policy” which discusses the treatment of equity
awards upon the termination due to death of an employee’s or non-employee director’s employment or other service relationship
with the Company or any of its subsidiaries.

(5) Represents acceleration of vesting of 100% of the total number of shares underlying outstanding and unvested stock options and

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RSUs.

(6) Represents nine months of our Chief Executive Officer’s annual base salary.

(7) Represents nine months of our contribution towards health insurance, based on our actual costs to provide health insurance to

our Chief Executive Officer immediately prior to termination.

(8) Represents 12 months of accelerated vesting for outstanding and unvested time-based equity awards.

(9) Represents 18 months of our Chief Executive Officer’s annual base salary.

(10) Represents 18 months of our contribution towards health insurance, based on our actual costs to provide health insurance to our

Chief Executive Officer immediately prior to termination.

(11) Represents six months of the applicable named executive officer’s annual base salary.

(12) Represents six months of our contribution toward health insurance, based on our actual costs to provide health insurance to the

applicable named executive officer immediately prior to termination.

(13) Represents 12 months of the applicable named executive officer’s annual base salary.

(14) Represents 12 months of our contribution towards health insurance, based on our actual costs to provide health insurance to the

applicable named executive officer immediately prior to termination.

(15) Represents accelerated vesting for 100% of the outstanding and unvested time-based equity awards granted to Mr. Boroditsky in

connection with his appointment as our Chief Revenue Officer.

CEO Pay Ratio

Pursuant to SEC rules, we are required to provide information regarding the relationship between the

annual total compensation of our Chief Executive Officer, and the median of the annual total
compensation of all of our employees (other than our Chief Executive Officer) for the year ended
December 31, 2021:

• the annual total compensation of our median employee was $166,789; and

• the annual total compensation of our Chief Executive Officer was $14,625,745, as reported in the
“Total Compensation” column in the “Summary Compensation Table” included in this proxy
statement.

Based on this information, for 2021, the ratio of the annual total compensation of our CEO to the

median of the annual total compensation of all our employees was 88:1. We believe this ratio is a
reasonable estimate calculated in a manner consistent with Item 402(u) of Regulation S-K under the
Exchange Act.

As a result of the increase in our number of employees from 4,629 employees as of December 31, 2020

to 7,867 employees as of December 31, 2021, we elected to identify a new median employee as of
December 31, 2021. In doing so, we used the same methodology we employed to identify the median
employee as of December 31, 2020. Specifically, as permitted by SEC rules, we reviewed total direct
compensation based on our consistently applied compensation measure, which we calculated as actual salary
paid to our employees for 2021, actual sales commission earned by our employees in 2021, and the grant date
fair value of equity awards granted to our employees in 2021. We used December 31, 2021 to determine our
employee population. In determining this population, we included all worldwide full-time and part-time
employees other than our Chief Executive Officer. We excluded contractors, workers employed through a
third-party provider, individuals with zero pay in 2021, and 380 employees of ValueFirst Digital Media
Private Limited, which was acquired by us in 2021, from our employee population. For employees paid in
other than U.S. dollars, we converted their compensation to U.S. dollars using the exchange rates used by us
for various purposes in effect on December 31, 2021 and did not make any cost-of-living adjustments to such
compensation. We did not annualize total direct compensation for employees employed by us for less than
the full fiscal year. Using our consistently applied compensation measure, we identified a median employee
who is a full-time U.S.-based salaried employee.

Once we selected the individual who represented the median employee, we then calculated the annual

total compensation for this employee using the same methodology we used for our named executive
officers in our 2021 Summary Compensation Table to yield the median annual total compensation
disclosed above.

The SEC’s rules for identifying the median employee and calculating the pay ratio based on that
employee’s annual total compensation allow companies to adopt a variety of methodologies, to apply
certain exclusions, and to make reasonable estimates and assumptions that reflect their employee
populations and compensation practices. We believe our methodologies are reasonable and best reflect
how we view these metrics. However, the pay ratio reported by other companies may not be comparable to
the pay ratio reported above, as other companies have different employee populations and compensation
practices and may utilize different methodologies, exclusions, estimates and assumptions in calculating
their own pay ratios.

COMPENSATION AND TALENT MANAGEMENT COMMITTEE REPORT

Our compensation and talent management committee has reviewed and discussed the section titled

“Compensation Discussion and Analysis” with management. Based on such review and discussion, our
compensation and talent management committee has recommended to the board of directors that the section
titled “Compensation Discussion and Analysis” be included in this proxy statement and incorporated by
reference into our Annual Report on Form 10-K for the fiscal year ended December 31, 2021.

Respectfully submitted by the members of our compensation and talent management committee of

the board of directors:

Compensation and Talent Management Committee

Jeffrey Immelt (Chairperson)
Deval Patrick

EQUITY COMPENSATION PLAN INFORMATION

The following table provides information as of December 31, 2021 with respect to the shares of our
common stock that may be issued under our existing equity compensation plans. We will not grant equity
awards in the future under any of the equity compensation plans not approved by stockholders included in
the table below.

On February 1, 2019, in connection with our acquisition of SendGrid, Inc. (“SendGrid”), we assumed

the shares reserved and available for issuance under SendGrid’s Amended and Restated 2009 Equity
Incentive Plan (the “SendGrid 2009 Plan”), Amended and Restated 2012 Equity Incentive Plan (the
“SendGrid 2012 Plan”) and Amended and Restated 2017 Equity Incentive Plan (the “SendGrid 2017
Plan”), and such shares became available for issuance under our 2016 Plan. On November 2, 2020, in
connection with our acquisition of Segment, we assumed outstanding Segment stock options and RSUs
under Segment’s Fifth Amended and Restated 2013 Stock Option and Grant Plan (the “Segment 2013
Plan”). On July 14, 2021, in connection with our acquisition of Zipwhip Inc. (“Zipwhip”), we assumed
outstanding Zipwhip stock options and RSUs under Zipwhip’s 2008 Stock Plan (the “Zipwhip 2008 Plan”)
and 2018 Equity Incentive Plan (“Zipwhip 2018 Plan”).

(a) Number of
Securities to be Issued
Upon Exercise of
Outstanding Options,
Warrants and Rights

(b) Weighted
Average
Exercise Price
of Outstanding
Options,
Warrants and
Rights

(c) Number of
Securities Remaining
Available for Future
Issuance Under
Equity Compensation
Plans (Excluding
Securities Reflected
in Column (a))

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Plan Category

Equity compensation plans approved by

stockholders(1) . . . . . . . . . . . . . . . . . . . . . . . . . .

15,330,724

$87.7759(2)

31,032,934(3)

Equity compensation plans not approved by

stockholders(4) . . . . . . . . . . . . . . . . . . . . . . . . . .

878,419

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

16,209,143

$44.5539

78.10

—

31,032,934

(1) Includes the following plans: our 2008 Plan, 2016 Plan, and our ESPP.

(2) Excludes shares issuable upon vesting of outstanding RSUs as of December 31, 2021, since such

shares have no exercise price.

(3) As of December 31, 2021, a total of 24,650,104 shares of our Class A common stock were reserved for

issuance pursuant to the 2016 Plan. This number includes shares reserved and available for issuance
under the SendGrid 2009 Plan, the SendGrid 2012 Plan and the SendGrid 2017 Plan that we assumed,
which were approved by the stockholders of SendGrid, but not by a separate vote of our stockholders;
such shares became available for issuance under our 2016 Plan, but awards using such shares may not
be granted to individuals who were employed, immediately prior to the acquisition, by us or our
subsidiaries. This number excludes the 9,023,405 shares that were added to the 2016 Plan as a result of
the automatic annual increase on January 1, 2022. The 2016 Plan provides that the number of shares
reserved and available for issuance under the 2016 Plan will automatically increase each January 1,
beginning on January 1, 2017, by 5% of the outstanding number of shares of our Class A and Class B
common stock on the immediately preceding December 31 or such lesser number of shares as
determined by our compensation and talent management committee. This number will be subject to
adjustment in the event of a stock split, stock dividend or other change in our capitalization. The
shares of Class A and Class B common stock underlying any awards that are forfeited, canceled, held
back upon exercise or settlement of an award to satisfy the exercise price or tax withholding,
reacquired by us prior to vesting, satisfied without the issuance of stock, expire or are otherwise
terminated, other than by exercise, under the 2016 Plan and the 2008 Plan will be added back to the
shares of Class A common stock available for issuance under the 2016 Plan (provided, that any such

shares of Class B common stock will first be converted into shares of Class A common stock). The
Company no longer makes grants under the 2008 Plan. As of December 31, 2021, a total of 6,382,830
shares of our Class A common stock were available for future issuance pursuant to the ESPP, which
number includes shares subject to purchase during the current purchase period, which commenced on
November 16, 2021 (the exact number of which will not be known until the purchase date on May 13,
2022) but excludes the 1,800,000 shares that were added to the ESPP as a result of the automatic
annual increase on January 1, 2022. Subject to the number of shares remaining in the share reserve,
the maximum number of shares purchasable by any participant on any one purchase date for any
purchase period, including the current purchase period may not exceed 5,000 shares. The ESPP
provides that the number of shares reserved and available for issuance under the ESPP will
automatically increase each January 1, beginning on January 1, 2017, by the lesser of 1,800,000 shares
of our Class A common stock, 1% of the outstanding number of shares of our Class A and Class B
common stock on the immediately preceding December 31 or such lesser number of shares as
determined by our compensation and talent management committee. This number will be subject to
adjustment in the event of a stock split, stock dividend or other change in our capitalization.

(4) In connection with our acquisitions of SendGrid, Segment and Zipwhip, we assumed outstanding

SendGrid, Segment and Zipwhip options and RSUs. As of December 31, 2021, there were (a) 170,970
shares issuable under such outstanding SendGrid stock options (with a weighted-average exercise
price of $20.5093) and 31,049 shares issuable under such outstanding SendGrid RSUs; (b) 504,587
shares issuable under such outstanding Segment stock options (with a weighted-average exercise price
of $51.7840) and 86,004 shares issuable under such outstanding Segment RSUs; and (c) 74,596 shares
issuable under such outstanding Zipwhip stock options (with a weighted-average exercise price of
$50.7560) and 11,213 shares issuable under such outstanding Zipwhip RSUs. No further grants may be
made under any of these plans.

SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth certain information available to us with respect to the beneficial

ownership of our capital stock as of April 30, 2022, for:

• each of our named executive officers;

• each of our directors;

• all of our current directors and executive officers as a group; and

• each person known by us to be the beneficial owner of more than 5% of the outstanding shares of

our Class A or Class B common stock.

We have determined beneficial ownership in accordance with the rules of the SEC, and thus it

represents sole or shared voting or investment power with respect to our securities. Unless otherwise
indicated below, to our knowledge, the persons and entities named in the table have sole voting and sole
investment power with respect to all shares that they beneficially owned, subject to community property
laws where applicable.

We have based our calculation of percentage ownership of our common stock on 171,861,852 shares
of our Class A common stock and 9,817,605 shares of our Class B common stock outstanding on April 30,
2022. We have deemed shares of our capital stock subject to stock options that are currently exercisable or
exercisable within 60 days of April 30, 2022 to be outstanding and to be beneficially owned by the person
holding the stock option for the purpose of computing the percentage ownership of that person. We have
deemed shares of our capital stock subject to RSUs for which the service condition has been satisfied or
would be satisfied within 60 days of April 30, 2022 to be outstanding and to be beneficially owned by the
person holding the RSUs for the purpose of computing the percentage ownership of that person. However,
we did not deem these shares subject to stock options or RSUs outstanding for the purpose of computing
the percentage ownership of any other person.

Unless otherwise indicated, the address of each beneficial owner listed in the table below is c/o Twilio

Inc., 101 Spear Street, First Floor, San Francisco, California 94105.

Name of Beneficial Owner

Voting %† Ownership %

Shares Beneficially Owned

Class A Common
Stock

Class B Common
Stock

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Named Executive Officers and Directors:
Jeff Lawson(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Khozema Shipchandler(2)
. . . . . . . . . . . . . . . . . . .
Eyal Manor(3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Marc Boroditsky(4) . . . . . . . . . . . . . . . . . . . . . . . . .
Dana R. Wagner(5) . . . . . . . . . . . . . . . . . . . . . . . . .
George Hu(6)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Chee Chew(7)
Richard Dalzell(8) . . . . . . . . . . . . . . . . . . . . . . . . . .
Byron Deeter(9)
. . . . . . . . . . . . . . . . . . . . . . . . . . .
Donna L. Dubinsky(10) . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Jeff Epstein(11)
Jeffrey Immelt(12) . . . . . . . . . . . . . . . . . . . . . . . . . .
Deval Patrick(13) . . . . . . . . . . . . . . . . . . . . . . . . . . .
Erika Rottenberg(14)
. . . . . . . . . . . . . . . . . . . . . . .
All executive officers and directors as a group

559,749
38,814
20,531
130,490
6,595
74,862
134,008
13,829
515,166
5,892
26,484
17,456
1,644
8,382

*
*
*
*
*
*
*
*
*
*
*
*
*
*

5,920,194

58.4
— —
— —
— —
— —
— —
— —
*
— —
— —
— —
— —
— —
*

76,500

15,300

21.8
*
*
*
*
*
*
*
*
*
*
*
*
*

(11 persons)(15):

. . . . . . . . . . . . . . . . . . . . . . . . .

1,214,542

0.7

6,011,994

58.9

22.3

3.6
*
*
*
*
*
*
*
*
*
*
*
*
*

4.0

Shares Beneficially Owned

Class A Common
Stock

Class B Common
Stock

Name of Beneficial Owner

Voting %† Ownership %

5% Stockholders:
The Vanguard Group(16) . . . . . . . . . . . . . . . . . . .
BlackRock, Inc.(17) . . . . . . . . . . . . . . . . . . . . . . . .
Amazon.com NV Investment Holdings

LLC(18) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . .

John Wolthuis(19)

10,443,890
9,295,211

6.1
5.4

— —
— —

— — 1,768,346
— — 1,478,474

18.0
15.1

3.9
3.4

6.6
5.5

5.7
5.1

*
*

* Represents beneficial ownership of less than one percent (1%) of the outstanding shares.

†

Percentage of total voting power represents voting power with respect to all shares of our Class A
common stock and Class B common stock, as a single class. The holders of our Class A common stock
are entitled to one vote per share, and the holders of our Class B common stock are entitled to ten
votes per share.

(1) Consists of (i) 68,316 shares of Class A common stock held of record by Mr. Lawson, as trustee of the

Lawson Revocable Trust, (ii) 4,580,822 shares of Class B common stock held of record by
Mr. Lawson, as trustee of the Lawson Revocable Trust, (iii) 1,022,705 shares of Class B common stock
held of record by The Lawson 2014 Irrevocable Trust, J.P. Morgan Trust Company, as trustee, (iv)
491,433 shares of Class A common stock subject to outstanding options that are exercisable within 60
days of April 30, 2022, and (v) 316,667 shares of Class B common stock subject to outstanding options
that are exercisable within 60 days of April 30, 2022.

(2) Consists of (i) 1,956 shares of Class A common stock held of record by Mr. Shipchandler, (ii) 29,928
shares of Class A common stock subject to outstanding options that are exercisable within 60 days of
April 30, 2022 and (iii) 6,930 shares of Class A common stock issuable upon the settlement of RSUs
releasable within 60 days of April 30, 2022.

(3) Consists of (i) 4,753 shares of Class A common stock held of record by Mr. Manor, (ii) 7,938 shares of

Class A common stock subject to outstanding options that are exercisable within 60 days of April 30,
2022 and (iii) 7,840 shares of Class A common stock issuable upon the settlement of RSUs releasable
within 60 days of April 30, 2022.

(4) Consists of (i) 8,323 shares of Class A common stock held of record by Mr. Boroditsky, (ii) 115,261

shares of Class A common stock subject to outstanding options that are exercisable within 60 days of
April 30, 2022 and (iii) 6,906 shares of Class A common stock issuable upon the settlement of RSUs
releasable within 60 days of April 30, 2022.

(5) Consists of 6,595 shares of Class A common stock issuable upon the settlement of RSUs releasable

within 60 days of April 30, 2022 for Mr. Wagner.

(6) Consists of 74,862 shares of Class A common stock held of record by Mr. Hu, as trustee of the Hu/Luo

Family 2005 Trust.

(7) Consists of 134,008 shares of Class A common stock held of record by Mr. Chew, all of which are

pledged as collateral to secure certain personal indebtedness.

(8) Consists of (i) 13,829 shares of Class A common stock held of record by Mr. Dalzell and (ii) 76,500

shares of Class B common stock subject to outstanding options that are exercisable within 60 days of
April 30, 2022.

(9) Consists of (i) 16,514 shares of Class A common stock held of record by Mr. Deeter and (ii) 498,652
shares of Class A Common stock held of record by Byron B. Deeter and Allison K. Deeter Trustees
TD July 28, 2000.

(10) Consists of 5,892 shares of Class A Common stock held of record by Ms. Dubinsky, as trustee of the

Shustek-Dubinsky Family Trust.

(11) Consists of 26,484 shares of Class A common stock held of record by Mr. Epstein, as Trustee of the

Epstein Family Revocable Trust.

(12) Consists of (i) 16,413 shares of Class A common stock held of record by Mr. Immelt and (ii) 1,043
shares of Class A common stock issuable upon the settlement of RSUs releasable within 60 days of
April 30, 2022.

(13) Consists of 1,644 shares of Class A common stock held of record by Mr. Patrick.

(14) Consists of (i) 8,382 shares of Class A common stock held of record by Ms. Rottenberg, as trustee of
the Erika Rottenberg Revocable Trust and (ii) 15,300 shares of Class B common stock held of record
by Ms. Rottenberg, as trustee of the Erika Rottenberg Revocable Trust.

(15) Consists of (i) 662,835 shares of Class A common stock held of record, (ii) 5,618,827 shares of Class B
common stock held of record, (iii) 529,299 shares of Class A common stock subject to outstanding
stock options that are exercisable within 60 days of April 30, 2022, (iv) 393,167 shares of Class B
common stock subject to outstanding stock options that are exercisable within 60 days of April 30,
2022 and (v) 22,408 shares of Class A common stock issuable upon the settlement of RSUs releasable
within 60 days of April 30, 2022.

(16) Based on information reported by The Vanguard Group on Schedule 13G/A filed with the SEC on

February 10, 2022. Of the shares of Class A common stock beneficially owned, The Vanguard Group
reported that it has sole dispositive power with respect to 10,091,990 shares, shared dispositive power
with respect to 351,900 shares, sole voting power with respect to no shares and shared voting power
with respect to 147,064 shares. The Vanguard Group listed their address as 100 Vanguard Blvd.,
Malvern, Pennsylvania 19355.

(17) Based on information reported by BlackRock, Inc. on Schedule 13G/A filed with the SEC on

February 8, 2022. Of the shares of Class A common stock beneficially owned, Blackrock, Inc. reported
that it has sole dispositive power with respect to 9,295,211 shares and sole voting power with respect to
8,022,375. BlackRock, Inc. listed its address as 55 East 52nd Street, New York, New York 10055.

(18) Based on shares held of record by Amazon.com NV Investment Holdings LLC as of April 30, 2022
and registered with our transfer agent. Amazon NV Investment Holdings LLC’s address is listed as
410 Terry Avenue North, Seattle, WA 98109.

(19) Consists of 1,478,474 shares of Class B common stock held of record by Mr. Wolthuis.

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CERTAIN RELATIONSHIPS AND RELATED PARTY TRANSACTIONS

In addition to the compensation arrangements discussed in the section titled “Executive

Compensation,” including employment, termination of employment and change in control arrangements,
the following is a description of each transaction since the beginning of our last fiscal year, and each
currently proposed transaction in which:

• we have been or are to be a participant;

• the amount involved exceeded or exceeds $120,000; and

• any of our directors, executive officers, or holders of more than 5% of our capital stock, or any

immediate family member of, or person sharing the household with, any of these individuals, had or
will have a direct or indirect material interest.

Investors’ Rights Agreement

We are party to an investors’ rights agreement which provides, among other things, that certain
holders of our capital stock have the right to demand that we file a registration statement or request that
their shares of our capital stock be covered by a registration statement that we are otherwise filing. The
parties to the investors’ rights agreement include entities affiliated with Jeff Lawson, our Chief Executive
Officer and current director, an entity affiliated with Jeff Epstein, our current director, Evan Cooke, a
former director, and Amazon.com NV Investment Holdings LLC and John Wolthuis, holders of more than
5% of our Class B common stock.

Sublease with Numenta

In the second quarter of fiscal year 2021, we entered into a sublease with Numenta, Inc. (“Numenta”),
whereby we subleased 2,420 square feet of our unoccupied Redwood City office space to Numenta. Donna
Dubinsky, a member of our board of directors, serves as the Chief Executive Officer and a director of
Numenta. The sublease was entered into on terms no less favorable than terms generally available to an
unaffiliated third party under the same or similar circumstances and at market rates. The term of the
sublease is for 12 months commencing on August 1, 2021, with Numenta having the option to renew for
two 12-month extension periods. The rent was initially set at $18,225 per month, and if Numenta opts to
renew the sublease, the rent for the first and second 12-month extension periods includes set increases at
$18,771.75 per month and $19,334.90 per month, respectively. If such options to renew are exercised by
Numenta, the aggregate payments expected to be made under the sublease over the 36 month period is
approximately $675,979.80, which is in compliance with the NYSE and LTSE director independence
standards and does not exceed the greater of $1 million or 2% of Numenta’s consolidated gross revenues.
In January 2022, Numenta timely notified us of its intention to exercise the option to renew the sublease
for the first additional 12-month period. Accordingly, the rent will increase to $18,771.75 per month
effective August 1, 2022.

Other Transactions

We have granted stock options and RSUs to our named executive officers and certain of our directors.

See the section titled “Executive Compensation—Individual Compensation Arrangements—Long-Term
Incentive Compensation”, “Executive Compensation—Outstanding Equity Awards at Fiscal Year-End
Table” and “Board of Directors and Corporate Governance—Non-Employee Director Compensation” for
a description of these stock options and RSUs.

We have entered into severance and change in control arrangements with certain of our executive
officers pursuant to employment offer letters and/or our severance plan that, among other things, provides
for certain severance and change in control payments and benefits. See the sections titled “Executive
Compensation—Post-Employment Compensation Arrangements” and “Executive Compensation—
Potential Payments Upon Termination or Change in Control.”

Other than as described above under this section titled “Certain Relationships and Related Party
Transactions,” since January 1, 2021, we have not entered into any transactions, nor are there any currently
proposed transactions, between us and a related party where the amount involved exceeds, or would
exceed, $120,000, and in which any related person had or will have a direct or indirect material interest.
We believe the terms of the transactions described above were comparable to terms we could have
obtained in arm’s-length dealings with unrelated third parties.

Indemnification of Officers and Directors

Our amended and restated certificate of incorporation contains provisions that limit the liability of
our directors for monetary damages to the fullest extent permitted by Delaware law. Consequently, our
directors will not be personally liable to us or our stockholders for monetary damages for any breach of
fiduciary duties as directors, except liability for the following:

• any breach of their duty of loyalty to our Company or our stockholders;

• any act or omission not in good faith or that involves intentional misconduct or a knowing violation

of law;

• unlawful payments of dividends or unlawful stock repurchases or redemptions as provided in

Section 174 of the Delaware General Corporation Law; or

• any transaction from which they derived an improper personal benefit.

Any amendment to, or repeal of, these provisions will not eliminate or reduce the effect of these
provisions in respect of any act, omission or claim that occurred or arose prior to that amendment or
repeal. If the Delaware General Corporation Law is amended to provide for further limitations on the
personal liability of directors of corporations, then the personal liability of our directors will be further
limited to the greatest extent permitted by the Delaware General Corporation Law.

In addition, our second amended and restated bylaws provide that we will indemnify, to the fullest
extent permitted by law, any person who is or was a party or is threatened to be made a party to any action,
suit or proceeding by reason of the fact that he or she is or was one of our directors or officers or is or was
serving at our request as a director or officer of another corporation, partnership, joint venture, trust or
other enterprise. Our second amended and restated bylaws provide that we may indemnify our employees
and agents to the extent not prohibited by the Delaware General Corporation Law or other applicable law.
Our second amended and restated bylaws also provide that we must advance expenses incurred by or on
behalf of a director or officer in advance of the final disposition of any action or proceeding, subject to
limited exceptions.

Further, we have entered into indemnification agreements with each of our directors and executive

officers that may be broader than the specific indemnification provisions contained in the Delaware
General Corporation Law. These indemnification agreements require us, among other things, to indemnify
our directors and executive officers against liabilities that may arise by reason of their status or service.
These indemnification agreements also require us to advance all expenses incurred by the directors and
executive officers in investigating or defending any such action, suit or proceeding. We believe that these
agreements are necessary to attract and retain qualified individuals to serve as directors and executive
officers.

The limitation of liability and indemnification provisions that are included in our amended and

restated certificate of incorporation, second amended and restated bylaws and in indemnification
agreements that we have entered into with our directors and executive officers may discourage
stockholders from bringing a lawsuit against our directors and executive officers for breach of their
fiduciary duties. They may also reduce the likelihood of derivative litigation against our directors and
executive officers, even though an action, if successful, might benefit us and other stockholders. Further, a

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stockholder’s investment may be adversely affected to the extent that we pay the costs of settlement and
damage awards against directors and executive officers as required by these indemnification provisions.

We have obtained insurance policies under which, subject to the limitations of the policies, coverage is

provided to our directors and executive officers against loss arising from claims made by reason of breach
of fiduciary duty or other wrongful acts as a director or executive officer, including claims relating to public
securities matters, and to us with respect to payments that may be made by us to these directors and
executive officers pursuant to our indemnification obligations or otherwise as a matter of law.

Certain of our non-employee directors may, through their relationships with their employers, be
insured and/or indemnified against certain liabilities incurred in their capacity as members of our board of
directors.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to

directors, officers or persons controlling our Company pursuant to the foregoing provisions, we have been
informed that, in the opinion of the SEC, such indemnification is against public policy as expressed in the
Securities Act and is therefore unenforceable.

Policies and Procedures for Related Party Transactions

As set forth in our audit committee charter, our audit committee has the primary responsibility for

reviewing and approving or disapproving “related party transactions,” which are transactions between us
and related persons in which the aggregate amount involved exceeds or may be expected to exceed
$120,000 and in which a related person has or will have a direct or indirect material interest. Our policy
regarding transactions between us and related persons provides that a related person is defined as a
director, executive officer, nominee for director or greater than 5% beneficial owner of our Class A and
Class B common stock or the capital stock of one or more of our subsidiaries, in each case since the
beginning of the most recently completed year, and any of their immediate family members. Our audit
committee charter provides that our audit committee shall review and approve or disapprove any related
party transactions.

OTHER MATTERS

2021 Annual Report and SEC Filings

Our financial statements for the year ended December 31, 2021 are included in our annual report on

Form 10-K, which we will make available to stockholders at the same time as this proxy statement. Our
annual report and this proxy statement are posted on our website at https://investors.twilio.com and are
available from the SEC at its website at www.sec.gov. You may also obtain a copy of our annual report
without charge by sending a written request to Investor Relations, Twilio Inc., 101 Spear Street, First
Floor, San Francisco, California 94105.

The board of directors does not know of any other matters to be presented at the Annual Meeting. If
any additional matters are properly presented at the Annual Meeting, the persons named in the enclosed
proxy card will have discretion to vote shares they represent in accordance with their own judgment on
such matters.

It is important that your shares be represented at the Annual Meeting, regardless of the number of

shares that you hold. You are, therefore, urged to vote by telephone or by using the Internet as instructed
on the enclosed proxy card or execute and return, at your earliest convenience, the enclosed proxy card in
the envelope that has also been provided.

THE BOARD OF DIRECTORS
San Francisco, California
May 5, 2022

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APPENDIX A
KEY BUSINESS METRICS AND NON-GAAP FINANCIAL MEASURE INFORMATION

Set forth below in this Appendix A is important information about how we measure Active Customer

Accounts and Dollar-Based Net Expansion Rate, as well as a reconciliation of our non-GAAP to GAAP
financial measures.

Number of Active Customer Accounts

We believe that the number of Active Customer Accounts is an important indicator of the growth of

our business, the market acceptance of our platform and future revenue trends. We define an Active
Customer Account at the end of any period as an individual account, as identified by a unique account
identifier, for which we have recognized at least $5 of revenue in the last month of the period. We believe
that use of our platform by customers at or above the $5 per month threshold is a stronger indicator of
potential future engagement than trial usage of our platform or usage at levels below $5 per month. In the
years ended December 31, 2021, 2020 and 2019, revenue from Active Customer Accounts represented over
99% of total revenue in each period. A single organization may constitute multiple unique Active
Customer Accounts if it has multiple account identifiers, each of which is treated as a separate Active
Customer Account.

Dollar-Based Net Expansion Rate

Our ability to drive growth and generate incremental revenue depends, in part, on our ability to
maintain and grow our relationships with existing Active Customer Accounts and to increase their use of
the platform. An important way in which we have historically tracked performance in this area is by
measuring the Dollar-Based Net Expansion Rate for Active Customer Accounts. Our Dollar-Based Net
Expansion Rate increases when such Active Customer Accounts increase their usage of a product, extend
their usage of a product to new applications or adopt a new product. Our Dollar-Based Net Expansion
Rate decreases when such Active Customer Accounts cease or reduce their usage of a product or when we
lower usage prices on a product. As our customers grow their businesses and extend the use of our
platform, they sometimes create multiple customer accounts with us for operational or other reasons. As
such, when we identify a significant customer organization (defined as a single customer organization
generating more than 1% of revenue in a quarterly reporting period) that has created a new Active
Customer Account, this new Active Customer Account is tied to, and revenue from this new Active
Customer Account is included with, the original Active Customer Account for the purposes of calculating
this metric. We believe that measuring Dollar-Based Net Expansion Rate provides a more meaningful
indication of the performance of our efforts to increase revenue from existing customers.

For historical periods through December 31, 2019, our Dollar-Based Net Expansion Rate compared
the revenue from Active Customer Accounts, other than large Active Customer Accounts that have never
entered into 12-month minimum revenue commitment contracts with us, in a quarter to the same quarter
in the prior year. For reporting periods starting with the three months ended March 31, 2020, our Dollar-
Based Net Expansion Rate compares the revenue from all Active Customer Accounts in a quarter to the
same quarter in the prior year. To calculate the Dollar-Based Net Expansion Rate, we first identify the
cohort of Active Customer Accounts that were Active Customer Accounts in the same quarter of the prior
year. The Dollar-Based Net Expansion Rate is the quotient obtained by dividing the revenue generated
from that cohort in a quarter, by the revenue generated from that same cohort in the corresponding
quarter in the prior year. When we calculate Dollar-Based Net Expansion Rate for periods longer than
one quarter, we use the average of the applicable quarterly Dollar-Based Net Expansion Rates for each of
the quarters in such period. Revenue from acquisitions does not impact the Dollar-Based Net Expansion
Rate calculation until the quarter following the one-year anniversary of the applicable acquisition, unless
the acquisition closing date is the first day of a quarter. As a result of the change in calculation of Dollar-
Based Net Expansion Rate, unless specifically identified as being calculated based on total revenue, any

A-1

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Dollar-Based Net Expansion Rates disclosed by us in our SEC filings, press releases and presentations
prior to the date of our press release for the three months ended March 31, 2020, will not be directly
comparable to our Dollar-Based Net Expansion Rates going forward.

Non-GAAP Financial Measures

We use the following non-GAAP financial information, collectively, to evaluate our ongoing
operations and for internal planning and forecasting purposes. We believe that non-GAAP financial
information, when taken collectively, may be helpful to investors because it provides consistency and
comparability with past financial performance, facilitates period-to-period comparisons of results of
operations and assists in comparisons with other companies, many of which use similar non-GAAP
financial information to supplement their GAAP results. Non-GAAP financial information is presented
for supplemental informational purposes only, should not be considered a substitute for financial
information presented in accordance with generally accepted accounting principles, and may be different
from similarly-titled non-GAAP measures used by other companies. Whenever we use a non-GAAP
financial measure, a reconciliation is provided to the most closely applicable financial measure stated in
accordance with generally accepted accounting principles. Investors are encouraged to review the related
GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most
directly comparable GAAP financial measures.

Non-GAAP Income (Loss) from Operations and Non-GAAP Operating Margin

For the periods presented, we define non-GAAP income (loss) from operations and non-GAAP
operating margin as GAAP loss from operations and GAAP operating margin, respectively, adjusted to
exclude, as applicable, certain expenses as presented in the table below:

Reconciliation:
Loss from operations . . . . . . . . . . . . . . . . . . . . . . .
Operating Margin . . . . . . . . . . . . . . . . . . . . . . . . .
Non-GAAP adjustments:
Stock-based compensation . . . . . . . . . . . . . . . . . .
Amortization of acquired intangibles . . . . . . . . .
Acquisition-related expenses . . . . . . . . . . . . . . . .
Charitable contributions . . . . . . . . . . . . . . . . . . . .
Payroll taxes related to stock-based

Year Ended December 31,

2021

2020

2019

(In thousands)

$(915,584)

$(492,901)

$(369,785)

(32)%

(28)%

(33)%

632,285
198,784
7,449
31,169

361,911
98,494
21,765
18,993

264,318
72,807
15,713
—

compensation . . . . . . . . . . . . . . . . . . . . . . . . . . .

48,417

27,389

15,188

Non-GAAP income (loss) from operations . .

2,520

$ 35,651

(1,759)

Non-GAAP operating margin . . . . . . . . . . . . .

—%

A-2

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

È ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT 1934

‘ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2021

For the transition period from to
Commission File Number: 001-37806

TWILIO INC.
(Exact name of registrant as specified in its charter)

Delaware
(State or other jurisdiction of incorporation or organization)

26-2574840
(I.R.S. Employer Identification Number)

101 Spear Street, First Floor
San Francisco, California 94105
(Address of principal executive offices) (Zip Code)
(415) 390-2337
(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the act:
Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Class A Common Stock, par value $0.001 per share

TWLO

New York Stock Exchange
Long-Term Stock Exchange

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act: Yes È No ‘
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act: Yes ‘ No È
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities

Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90 days. Yes È No ‘

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted

pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the
registrant was required to submit such files). Yes È No ‘

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller

reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller
reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Non-accelerated filer ‘
Accelerated filer ‘
Large accelerated filer È

Smaller reporting company ‘
Emerging growth company ‘
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for

complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ‘
Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the
effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by
the registered public accounting firm that prepared or issued its audit report. ‘

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ‘ No È
The aggregate market value of stock held by non-affiliates as of June 30, 2021 (the last business day of the registrant’s most
recently completed second quarter) was $51.0 billion based upon $394.16 per share, the closing price on June 30, 2021 on the New
York Stock Exchange. Determination of stock ownership by non-affiliates was made solely for the purpose of responding to this
requirement and the registrant is not bound by this determination for any other purpose.

On February 15, 2022, 171,702,846 shares of the registrant’s Class A common stock and 9,820,605 shares of registrant’s Class B

common stock were outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the registrant’s definitive Proxy Statement for the 2022 Annual Meeting of Stockholders are incorporated herein by

reference in Part III of this Annual Report on Form 10-K to the extent stated herein. Such Proxy Statement will be filed with the
Securities and Exchange Commission within 120 days of the registrant’s fiscal year ended December 31, 2021.

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TWILIO INC.
Annual Report on Form 10-K
For the Fiscal Year Ended December 31, 2021
TABLE OF CONTENTS

PART I
Item 1.
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1A. Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 1B. Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 2.
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 3.
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 4. Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer

Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
[Reserved] . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Item 6.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of

Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 7A. Quantitative and Qualitative Disclosures About Market Risk . . . . . . . . . . . . . . . . . . . . . . .
Item 8.
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial

Disclosure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9A. Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9B. Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections . . . . . . . . . . . . . . . . .

PART III

Item 10. Directors, Executive Officers and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 11. Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related

Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 13. Certain Relationships and Related Transactions and Director Independence . . . . . . . . . .
Item 14. Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

PART IV

Item 15. Exhibits, Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Item 16. Form 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

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Special Note Regarding Forward-Looking Statements

This Annual Report on Form 10-K 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 Annual
Report on Form 10-K include, but are not limited to, statements about:

• the impact of the coronavirus disease of 2019 (“COVID-19”) pandemic on the global economy, our

customers, employees and business;

• our future financial performance, including our revenue, cost of revenue, gross margin and
operating expenses, ability to generate positive cash flow and ability to achieve and sustain
profitability;

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

• our ability to continue to build and maintain credibility with the global software developer

community;

• our ability to attract and retain customers to use our products;

• the evolution of technology affecting our products and markets;

• our ability to introduce new products and enhance existing products;

• our ability to comply with modified or new industry standards, laws and regulations applying to our
business, including the General Data Protection Regulation (“GDPR”), the Schrems II decision
invalidating the EU-US Privacy Shield, the California Consumer Privacy Act of 2018 (“CCPA”) and
other privacy or cybersecurity regulations that may be implemented in the future, and Signature-
based Handling of Asserted Information Using toKENs (“SHAKEN”) and Secure Telephone
Identity Revisited (“STIR”) standards (together, “SHAKEN/STIR”) and other robocalling
prevention and anti-spam standards and increased costs associated with such compliance;

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

protections, investments and resources 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 manage changes in network service provider fees that we pay in connection with the

delivery of communications on our platform;

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

• our ability to pass on our savings associated with our platform optimization efforts to our

customers;

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

• our ability to attract and retain enterprises and international organizations as customers for our

products;

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

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

• the attraction and retention of qualified employees and key personnel;

• our ability to effectively manage our growth and future expenses and maintain our corporate

culture;

• our ability to compete effectively in an intensely competitive market;

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

• our anticipated investments in sales and marketing, research and development and additional

systems and processes to support our growth;

• 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”), 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;

• our expectations about the impact of climate change, natural disasters, public health epidemics and

other natural catastrophic events and man-made problems such as data security breaches or
terrorism; and

• our ability to successfully integrate and realize the benefits of our past or future strategic

acquisitions or investments.

We caution you that the foregoing list may not contain all of the forward-looking statements made in

this Annual Report on Form 10-K.

You should not rely upon forward-looking statements as predictions of future events. We have based

the forward-looking statements contained in this Annual Report on Form 10-K primarily on our current
expectations and projections about future events and trends that we believe may affect our business,
financial condition, results of operations and prospects. The outcome of the events described in these
forward-looking statements is subject to risks, uncertainties and other factors described in “Summary of
Risk Factors and Uncertainties Associated with Our Business” below, in Part I, Item 1A, “Risk Factors,”
and elsewhere in this Annual Report on Form 10-K. 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 Annual Report on Form 10-K. 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 Annual Report on Form 10-K 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 Annual Report on Form 10-K to reflect events or circumstances after the date of
this Annual Report on Form 10-K 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.

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Summary of Risk Factors and Uncertainties Associated with Our Business

Our business is subject to numerous risks and uncertainties outside of our control. One, or a
combination, of these risks and uncertainties could materially affect any of those matters as to which we
have made forward-looking statements and cause our actual results or an actual event or occurrence to
differ materially from those results or an event or occurrence described in a forward-looking statement.
Some of the principal risks associated with our business include the following:

• the impact of the global COVID-19 pandemic;

• new and unproven markets for our products and platform;

• our ability to effectively manage our rapid growth;

• fluctuations in our quarterly results and our ability to meet securities analysts’ and investors’

expectations;

• our ability to maintain and enhance our brand and increase market awareness of our company and

products;

• limitations on the use and adoption of our solutions due to privacy laws, data collection and transfer

restrictions and related domestic or foreign regulations;

• our ability to maintain and grow our relationships with existing customers and have them increase their

usage of our platform;

• our ability to attract new customers in a cost-effective manner;

• our ability to develop enhancements to our products and introduce new products that achieve market

acceptance;

• our ability to compete effectively in the markets in which we participate;

• our history of losses and uncertainty about our future profitability;

• our ability to increase adoption of our products by enterprises;

• our ability to expand our relationships with existing technology partner customers and add new

technology partner customers;

• significant risks associated with expansion of our international operations;

• compliance with applicable laws and regulations;

• telecommunications-related regulations and future legislative or regulatory actions;

• our ability to obtain or retain geographical, mobile, regional, local or toll-free numbers and to effectively

process requests to port such numbers in a timely manner due to industry regulations;

• our ability to adapt and respond effectively to rapidly changing technology, evolving industry standards,

changing regulations, and changing customer needs, requirements or preferences;

• our ability to provide monthly uptime service level commitments of a minimum of 99.95% under our

agreements with customers;

• any breaches of our networks or systems, or those of AWS or our service providers;

• defects or errors in our products;

• any loss or decline in revenue from our largest customers;

• litigation by third parties for alleged infringement of their proprietary rights;

• exposure to substantial liability for intellectual property infringement and other losses from indemnity

provisions in various agreements;

• our ability to successfully utilize or to integrate acquired businesses and technologies successfully or to

achieve the expected benefits of such acquisitions, partnerships and investments;

• the loss of our senior management and other key employees;

• our use of open source software;

• our reliance on SaaS technologies from third parties;

• potentially adverse tax consequences on our global operations and structure;

• fraudulent usage of or activity relating to our products;

• unfavorable conditions in our industry or the global economy;

• requirement of additional capital to support our business and its availability on acceptable terms, if at

all;

• exposure to foreign currency exchange rate fluctuations;

• our ability to use our net operating losses and certain other tax attributes to offset future taxable income

and taxes;

• our failure to maintain an effective system of disclosure controls and internal control over financial

reporting;

• the risks of pandemics, earthquakes, fire, floods and other natural catastrophic events and of

interruption by man-made problems such as power disruptions, computer viruses, data security breaches
or terrorism;

• volatility of the trading price of our Class A common stock;

• potential decline in the market price of our Class A common stock due to substantial future sales of

shares;

• requirement of a significant amount of cash to service our future debt; and

• our ability to raise the funds necessary for the repayment of the 2029 Notes and 2031 Notes for cash.

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Item 1.

Business

Overview

PART I

Software developers are reinventing nearly every aspect of business today. Yet as developers, we
repeatedly encountered an area where we could not innovate—communications. Because communication
is a fundamental human activity and vital to building great businesses, we wanted to incorporate
communications into our software applications, but the barriers to innovation were too high. Twilio was
started to solve this problem in 2008.

Twilio spent over a decade building the leading cloud communication platform, but communications

Cloud platforms are a category of software that enable developers to build and manage applications

without the complexity of creating and maintaining the underlying infrastructure. These platforms have
arisen to enable a fast pace of innovation across a range of categories, such as computing and storage. We
are the leader in the cloud communications platform category. We enable developers to build, scale and
operate real-time customer engagement within software applications.

We offer a customer engagement platform with software designed to address specific use cases, like

account security and contact centers, and a set of Application Programming Interfaces (“APIs”) that
handles the higher-level communication logic needed for nearly every type of customer engagement. These
APIs are focused on the business challenges that a developer is looking to address, allowing our customers
to more quickly and easily build better ways to engage with their customers throughout their journey. Our
engagement platform also includes a set of APIs that enable developers to embed voice, messaging, video
and email capabilities into their applications, and are designed to support almost all the fundamental ways
humans communicate, unlocking innovators to address just about any communication market. The Super
Network is our software layer that allows our customers’ software to communicate with connected devices
globally. It interconnects with communications networks and inbox service providers around the world and
continually analyzes data to optimize the quality and cost of communications that flow through our
platform. The Super Network also contains a set of APIs giving our customers access to more foundational
components of our platform, like phone numbers and session initiation protocol (“SIP”) Trunking.

In February 2019 we acquired SendGrid, Inc. (“SendGrid”), the leading email API platform. Email is

an important channel for businesses to communicate with their customers and incorporating SendGrid’s
products into our platform allows us to enable businesses to engage with their customers via email
effectively and at scale.

In November 2020 we acquired Segment.io, Inc. (“Segment”), the market-leading customer data
platform. Segment provides businesses a unified customer view to better understand their customers and
engage more effectively, enabling us to drive personalization at scale. The acquisition expands and
strengthens use cases across customer service, marketing, sales, product and analytics and accelerates
Twilio’s journey to build the world’s leading customer engagement platform.

In July 2021 we acquired Zipwhip, Inc., (“Zipwhip”) a leading provider of toll-free messaging in the

United States. Zipwhip’s customizable APIs enable organizations to text enable their existing toll-free
phone numbers in minutes and seamlessly fit texting into their workflows.

We had over 256,000 Active Customer Accounts as of December 31, 2021, representing organizations
big and small, old and young, across nearly every industry, with one thing in common: they are competing

by using the power of software to build differentiated customer engagement experiences. With our
customer engagement platform, our customers are disrupting existing industries and creating new ones.
For example, our customers’ software applications use our platform to notify a diner when a table is ready,
provide enhanced application security through two-factor authentication to safely recognize a customer,
connect potential buyers to real estate agents, and power large, omni-channel contact centers. The range
of applications that developers build with the Twilio platform has proven to be nearly limitless.

Our goal is for Twilio to be in the toolkit of every software developer in the world, from small

businesses to major enterprises. Because big ideas often start small, we encourage developers to
experiment and iterate on our platform. We love when developers explore what they can do with Twilio,
because one day they may have a business problem that they will use our products to solve.

As our customers succeed, we share in their success primarily through our usage-based revenue
model. Our revenue grows as customers increase their usage of a product, extend their usage of a product
to new applications or adopt a new product. We believe the most useful indicator of this increased activity
from our existing customer accounts is our Dollar-Based Net Expansion Rate, which for historical periods
through December 31, 2019, compares the revenue from a cohort of Active Customer Accounts, other
than Variable Customer Accounts, in a period to the same period in the prior year. As previously
announced in our Annual Report on Form 10-K filed with the SEC on March 2, 2020, commencing with
the three-month period ended March 31, 2020, we calculate our Dollar-Based Net Expansion Rate by
comparing total revenue from a cohort of Active Customer Accounts in a period to the same period in the
prior year (the “New DBNE Definition”). When we calculate Dollar-Based Net Expansion Rate for
periods longer than one quarter, we use the average of the applicable quarterly Dollar-Based Net
Expansion Rates for each of the quarters in such period. Under the New DBNE Definition, our Dollar-
Based Net Expansion Rate was 131% and 137% for the years ended December 31, 2021 and 2020,
respectively. See Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and
Results of Operations—Key Business Metrics—Dollar-Based Net Expansion Rate.”

Our Platform Approach

Twilio’s mission is to unlock the imagination of builders. Our plan is to be the leading customer
engagement platform. We enable builders—the developers of the world—to build, scale and operate real-
time communications within software applications, ultimately empowering every developer and company
to improve their interactions with their customers. This enables businesses to create novel and creative
new consumer experiences that delight their customers and differentiate their companies from their
competitors.

Our platform approach enables developers to build this future. Using our software, developers are
able to incorporate communications and customer data into applications that span a range of industries
and functionalities. Our technology partner customers also embed our products in solutions they sell to
other businesses.

Part of our core strategy is to provide a broad set of lower-level building blocks that can be used to
build practically any digital experience. By doing this, we allow developers’ creativity to flourish across the
widest set of use cases—some of which have not even been invented yet.

What are some of the common customer problems we are solving?

• Contact Center. Twilio gives companies complete control and flexibility to rapidly deploy remote

agents, digital channels, self-service and integrations for lower costs and higher productivity.

• Alerts and Notifications. From delivery notifications to critical emergency alerts, Twilio provides
the building blocks to develop critical communications across messaging channels (short message
service (“SMS”), multimedia message service (“MMS”), Short Codes, Toll-Free, WhatsApp,
Facebook Messenger, and Google Business Messages), voice and email channels.

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• User Identity Verification. Customers can use a globally optimized multi-channel user verification

solution to combat fraud, reduce fake user sign-ups and authorize sensitive account actions.

• Field services and contactless delivery. Our customers can use Twilio Conversations to ensure
privacy with masked communications, provide granular session control over user permissions,
session duration and roles and keep private information private.

• Marketing. Email and SMS campaign support to target, nurture and develop new customer

relationships.

• Customer Loyalty. Customers can send reminders about reward programs through email or

messaging to drive repeat purchases through loyalty incentives.

• Twilio For Good. Twilio partners with nonprofit organizations through Twilio.org, our social impact
division, to use the power of communications to help solve social challenges, such as an SMS hotline
to fight human trafficking, an emergency volunteer dispatch system, appointment reminders for
medical visits in developing nations and more.

Our Platform

Segment Customer Data Platform

Our acquisition of Segment added the leading customer data platform to Twilio’s platform. While
every business needs a complete view of their customers, data is typically siloed across many disparate
systems. Segment’s platform and APIs allow companies to collect, clean and control their customer data,
providing a single view of customers across channels for more effective engagement. When combined with
Twilio’s communication channels, this insight enables businesses to delight their customers with
personalized, timely and impactful communications on the right channel at the right time. The Segment
platform includes:

• Connections. Collect event data from mobile apps, websites and servers with one API, then pull in
contextual data from cloud-based apps like customer relationship management (“CRM”), payment
systems and internal databases to build a unified picture of the customer.

• Personas. Use identity resolutions to take event data from across devices and channels, merge the
data together, and create unified customer profiles to build and enrich audiences, and activate
audiences across marketing tools with a single view of the customer.

• Privacy. Comply with laws and regulations, such as General Data Protection Regulation (“GDPR”)
and the California Consumer Privacy Act of 2018 (“CCPA”), by using first-party data, collected and
privatized with Segment, instead of increasingly regulated third-party data.

• Protocols. Standardize data collection to create a single source of truth for customer data that is

clean, consistent, and compliant, and adheres to a well thought out tracking plan.

Channel APIs

Our Channel APIs consist of software products that can be used individually or in combination to
build rich contextual communications within applications. We offer flexible building blocks that enable our
customers to build what they need. Our easy-to-use developer APIs provide a programmatic channel to
access our software. Our Channel APIs include:

MessagingX

Twilio Programmable Messaging is an API to send and receive SMS, MMS and over-the-top (“OTT”)

(WhatsApp and Facebook Messenger) messages globally. It uses intelligent sending features to ensure
messages reliably reach end users wherever they are. Our customers build use cases, such as appointment

reminders, delivery notifications, order confirmations and many two-way and conversational use cases,
such as customer care. Programmable Messaging includes:

• SMS. Programmatically send and receive SMS messages around the world, supporting localized

languages in nearly every market. This includes support for the new 10-digit long code routes in the
United States (“U.S.”).

• MMS. Exchange picture messages and more over U.S. and Canadian phone numbers from

customer applications with built-in image transcoding and media storage.

• Toll-Free SMS. Send and receive text messages with the same toll-free number used for voice calls

in the U.S. and Canada.

• High-Throughput Toll-Free SMS. Starting at 25 messages per second, High-Throughput Toll Free

SMS lets you send and receive a higher volume of messages with the same toll-free number used for
voice calls in the U.S. and Canada.

• OTT channels. Programmatically send, receive and track messages to messaging apps such as

WhatsApp and Facebook Messenger.

We charge on a per-message basis for most of our Programmable Messaging products.

Voice

Twilio Programmable Voice allows developers to build solutions to make and receive phone calls
globally. They can make, manage and route calls to a browser, an app, a phone or anywhere else one can
take a call. Developers can also incorporate advanced voice functionality such as text-to-speech,
conferencing, recording and transcription. Through advanced call control software, developers can build
customized applications that address use cases such as contact centers, call tracking and analytics solutions
and anonymized communications. Our voice software works over both the traditional public switched
telephone network (“PSTN”) and over Internet Protocol (“VoIP”). Programmable Voice includes:

• Twilio Voice. Initiate, receive and manage phone calls globally, end to end through traditional voice

technology or between web browsers and landlines or mobile phones.

• Call Recording. Securely record, store, transcribe and retrieve voice calls in the cloud.

• Global Conference. Integrate audio conferencing that intelligently routes calls through cloud data

centers in the closest geographic region to reduce latency.

• Voice Insights. Call quality and performance data at the fingertips of our customers. Beyond details
of a single call, every account on Twilio has access to the Voice Insights Dashboard, a powerful tool
in Twilio Console that provides out-of-the-box visibility to key performance indicators and data to
understand changes in call behavior.

• Media Streams. Allows for real-time access to the raw audio stream of your phone calls. Through

Media Streams our customers can fork the media of a phone call in real-time, effectively creating a
copy of the initial audio stream that can be routed to your own application or to a third party to
power advanced capabilities of your choosing.

• SHAKEN/STIR. Signature-based Handling of Asserted Information Using toKENs (“SHAKEN”)
and Secure Telephone Identity Revisited (“STIR”) standards (together, “SHAKEN/STIR”) is a
protocol mandated by the Federal Communications Commission (“FCC”) to combat the rise in
unwanted robocalls and unlawful caller ID spoofing. When adopted, carriers can present a trust
indicator, like “Caller Verified,” to recipients’ phones. SHAKEN/STIR is free to all Twilio
customers and allows them to increase answer rates for their calls by giving their calls the highest
attestation under the SHAKEN and STIR caller authentication framework.

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• Programmable Voice SIP Interfaces. Enables voice infrastructure to be augmented with cloud

capabilities.

• Emergency Calling. Twilio’s Emergency Calling for SIP API enables emergency call routing to

Public Safety Answering Points (“PSAPs”) in the U.S., Canada and the United Kingdom (“UK”).

• Bring Your Own Carrier Trunking (“BYOC”). Enables connection of customer’s PSTN carrier to

Twilio’s programmable platform.

The Twilio SendGrid Email API solves email delivery challenges at scale and ensures our customers’

email program lives up to their product experience. Our Email API provides the flexibility for our
customers to build customized solutions, as well as helpful shortcuts to streamline integration and optimize
their inbox placement. Businesses use our email products for both marketing messages as well as
transactional emails, including shipping notifications, friend requests, password resets and sign-up
confirmations. Twilio SendGrid Email API includes:

• Integrations. Businesses can integrate our email API with multiple leading development

frameworks and client libraries in multiple programming languages.

• Internet Protocol (“IP”) Management. Domains and links can be customized, whether sending

from shared IP address pools or from a dedicated IP address, to improve reputation management
and delivery.

• Deliverability. Our proprietary Mail Transfer Agent (“MTA”) optimizes for inbox placement while
offering tools for sender reputation management and expert deliverability professional services.
Our real-time email address validation API checks email address legitimacy before sending to
improve deliverability.

• Sender Authentication. Our custom Sender Policy Framework and DomainKeys Identified Mail

record creation is designed to eliminate domain spoofing and phishing.

• Mobile support. Our deep linking functionality enables email engagement for mobile apps.

• Security. Our two-factor authentication, API key permissions and Event Webhook Security helps

enable secure management of our Email API by our customers.

Video

Programmable Video provides developers with the building blocks to add voice and video to web and
mobile applications. Developers can address multiple use cases such as video consultations, telemedicine,
distance learning, recruiting, social networking and more by using Programmable Video’s global cloud
infrastructure to build on WebRTC. They can use our JavaScript, iOS or Android SDKs, quickstarts and
open source sample code to launch applications in minutes, then customize them to meet the unique needs
of their use case. With Video Insights, developers can monitor the performance of their video applications
directly from the Twilio Console.

Twilio Live

Twilio Live gives developers the tools to create immersive, interactive audio or video live streaming
experiences. Low-latency delivery enables speakers and audience members to engage via chat, polls, and
inviting audience members “on stage” to speak. Developers can build interactive shopping experiences,
broadcast events such as conferences or concerts, fitness, and more using live streaming APIs, SDKs, and
sample code optimized for iOS, Android, and all major browsers.

Conversations

The Twilio Conversations API allows developers to build rich, one-to-one and group interactions for
customer support and commerce use cases. The unified messaging API provides cross-channel support for
SMS and MMS, Chat, WhatsApp, Facebook Messenger, and Google Business Messages – all while
archiving message history, preserving participant identity, and reducing time to market with software
development kits (“SDKs”) and pre-built mobile and web user interfaces.

Solutions

As we observe the customer engagement use cases that are most common and the workflows our
customers find most challenging, we create Solutions. We bring these Solutions to a broader audience,
including non-technical customers, in the form of higher level APIs. These solutions are built on top of our
Channel APIs to offer more fully implemented functionality for a specific purpose, such as contact center
or two-factor authentication. This saves developers significant time in building their applications. The
higher level APIs in this layer of our platform are focused on addressing a massive opportunity to recreate
and modernize the field of customer engagement. We charge on a per-seat or per-use basis for our
Solutions, which include:

Contact Center

Businesses must continually adapt to stay ahead of customers’ changing expectations. Twilio Flex is
the industry’s only fully programmable contact center platform that allows companies to deploy a broad
array of customer engagement channels while providing the tools to easily create, change or extend any
part of their custom solution. Twilio Flex enables businesses to rapidly deploy tailored cloud contact
centers free from the limitations of software-as-a-service (“SaaS”) applications.

User Verification

Online fraud has exploded from a minor nuisance to a major factor in how businesses operate today

requiring advanced solutions to register, onboard and recognize customers. Twilio Verify is a managed
solution that takes care of channel orchestration and management as well as security and business logic.
Using our two-factor authentication APIs (“Twilio Verify”), developers can add an extra layer of security to
their applications with second-factor passwords sent to a user via SMS, voice, email or push notifications.
Twilio Verify provides user authentication codes through a variety of formats based on the developer’s needs.
Codes can be delivered through the Authy app on registered mobile phones, desktop or smart devices or via
SMS and voice automated phone calls. In addition, authentication can be determined through a push
notification on registered smartphones. To allow developers to know exactly who they are sending messages
to, Twilio Lookup allows developers to validate number format, device type and provider prior to sending
messages or initiating calls.

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Marketing Campaigns

Marketing Campaigns is built on top of SendGrid’s proven email infrastructure to help digital
marketers build and send email campaigns at scale—faster than ever. With drag and drop editing,
approachable automation and powerful contacts management, Marketing Campaigns help marketers
attract and retain customers more efficiently. Marketing Campaigns include email design and templates,
list management, dynamic content and email testing.

Super Network

While developers build applications with our software, Twilio manages the connections between the

internet and the global telecommunications network. We call this the Twilio Super Network and it is a
global network of connections with numerous carriers globally to provide connectivity in approximately
80 countries.

We do not own any physical network infrastructure. We use software to build a high performance

network that optimizes performance for our customers, provides resiliency and redundancy to our
platform and helps to minimize disruption from carrier delays or outages. Through handling massive
volumes of traffic, we are able to detect issues often before our customers or carrier partners do. We
receive real-time feedback on handset deliverability through a number of carriers and destinations and we
use this data for our own routing decisions.

The Twilio Super Network operates a 24/7 global operations center that constantly monitors the
carrier networks, alongside Twilio’s dedicated communications engineers who optimize for changing traffic
patterns. The Super Network also contains a set of APIs giving our customers access to more foundational
components of our platform, like phone numbers, and SIP Trunking. The Super Network features include:

• Phone Number Provisioning. Acquire local, national, mobile and/or toll-free phone numbers on

demand in approximately 80 countries and connect them into the customers’ applications.

• Elastic SIP Trunking. Connect legacy voice applications to our Super Network over IP

infrastructure with globally available phone numbers and pay-as-you-go pricing. Twilio’s Emergency
Calling for SIP Trunking feature enables emergency call routing to PSAPs in the U.S., Canada and
the UK.

• Interconnect. Connect privately to Twilio to enable enterprise grade security and quality of service

for Twilio Voice and Elastic SIP Trunking.

We charge on a per-minute or per-phone number basis for most of our Super Network products.

IoT

The most challenging aspect of connecting previously unconnected devices lies in making the
connection reliable and secure enough to perform and add value for years on end. Twilio’s IoT offerings
therefore make connectivity simpler and coding of connected devices more reliable so that our customers
can focus on building differentiated IoT experiences versus building and maintaining the required
infrastructure underneath. Our customers use Twilio IoT for use cases, such as asset or fleet tracking,
smart building management, consumer wearables (often pulling in other Twilio products such as Voice,
Video, and Flex), predictive maintenance and inventory management.

Our Business Model for Innovators

Our goal is to include Twilio in the toolkit of every developer in the world, from small businesses to

major enterprises. Because big ideas often start small, developers need the freedom and tools to
experiment and iterate on their ideas.

In order to empower developers to experiment, our developer-first business model is low friction,

eliminating the upfront costs, time and complexity that typically hinder innovation. Additionally, our
model encourages experimentation and enables developers to grow as customers as their ideas succeed.
Developers can begin building with a free trial. They have access to self-service documentation and free
customer support to guide them through the process. Once developers determine that our software meets
their needs, they can flexibly increase consumption and pay based on usage. In short, we acquire
developers like consumers and enable them to spend like enterprises.

Our Growth Strategy

We are the leader in the cloud communications platform category based on revenue, market share
and reputation and intend to continue to set the pace for innovation. We also have the leading market
share in the Customer Data Platform category. Our overall strategy is to develop great APIs that
developers love. These developers are our champions and bring us “in” to companies of every type, most

frequently utilizing our messaging and email tools as an entry point. This “in” motion creates initial
relationships with customers of all sizes including major enterprises that allow us to move “up” the
software stack and provide those companies with software solutions that address their customer
engagement requirements from marketing to sales and support. Today, we offer Twilio Campaigns for
marketing, Twilio Flex for customer support and Twilio Verify to onboard and recognize customers. The
more strategic nature of these software products also allows us to move up the organization chart,
interacting with more senior and strategic purchasers. This “in” and “up” strategy is a motion we work on
improving every day. We will also continue to invest aggressively in our platform approach, which
prioritizes increasing our reach and scale. We intend to pursue the following growth strategies:

• Continue Significant Investment in our Technology Platform. We will continue to invest in building
new software capabilities and extending our platform to bring the power of contextual customer
engagement to a broader range of applications, geographies and customers. We have a substantial
research and development team, comprising approximately 39% of our headcount as of
December 31, 2021.

• Grow Our Developer Community and Accelerate Adoption. We will continue to enhance our
relationships with developers globally and seek to increase the number of developers on our
platform. In addition to adding new developers, we believe there is significant opportunity for
revenue growth from developers who already have registered accounts with us but have not yet built
their software applications with us, or whose applications are in their infancy and will grow with
Twilio into an Active Customer Account. As of December 31, 2021, we had more than 256,000
Active Customer Accounts on our platform.

• Increase Our International Presence. Our platform serves over 180 countries today, making it as

simple to communicate from São Paulo as it is from San Francisco. Customers outside the U.S. are
increasingly adopting our platform, and for the years ended December 31, 2021 and 2020, revenue
from international customer accounts accounted for 34% and 27% of our total revenue, respectively.
We are investing to meet the requirements of a broader range of global developers and enterprises.
We plan to grow internationally by continuing to expand our operations outside of the U.S. and
collaborating with international strategic partners.

• Further Penetrate the Enterprises. We plan to drive greater awareness and adoption of Twilio from
enterprises across industries. We intend to further increase our investment in sales and marketing
to meet evolving enterprise needs globally, in addition to extending our enterprise-focused use
cases and platform capabilities, like our Twilio Enterprise Plan. Additionally, we believe there is
significant opportunity to expand our relationships with existing enterprise customers.

• Expand Our Partner Channel. Our Twilio Build partner program is focused on growing our

community of technology and consulting partners. Twilio Build’s ecosystem of partners offers
customers both packaged applications and consulting expertise that make it possible for any
customer to innovate with Twilio regardless of region, industry, business model or development
resources. To help our partners grow their businesses and innovate for their customers, this
program provides go-to-market support, certification and training programs and a partner success
team. We have relationships with a number of technology partner customers that embed our
products in the solutions that they sell to other businesses. We intend to expand our relationships
with existing technology partner customers and to add new technology partner customers. We plan
to invest in a range of initiatives to encourage increased collaboration with, and generation of
revenue from, technology partner customers. We have developed relationships with consulting
partners who provide consulting and development services for organizations that have limited
software development expertise to build our platform into their software applications. We intend to
continue to invest in and develop the ecosystem for our solutions in partnership with consulting
partners to accelerate awareness and adoption of our platform.

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• Selectively Pursue Acquisitions and Strategic Investments. We may selectively pursue acquisitions
and strategic investments in businesses and technologies that strengthen our platform. From 2015
through 2021, we made several acquisitions which have allowed us to expand our platform and
service offerings to include features such as a cloud-based API to seamlessly embed two-factor
authentication and phone verification into any application, Web Real-Time-Communication (“Web
RTC”) media processing technologies, contact center analytics, software mobile network
infrastructure and language recognition capabilities. In addition, our acquisition of SendGrid in
February 2019 allowed us to add a leading e-mail API platform to our product offerings, our
acquisition of Segment in November 2020 allowed us to add the market-leading customer data
platform to our product offerings and our acquisition of Zipwhip in July 2021 allowed us to expand
the toll-free channel, offering developers and businesses another affordable, trusted, high-quality
engagement option via messaging-enabled toll-free numbers.

The Twilio Magic

We believe there’s a unique spirit to Twilio, manifested in who we are and how we work together. We
value and invest in a positive culture of optimism, innovation, and accountability. Our values, which we call
the Twilio Magic, remind us every day who we are at our core and guide how we act and how we make
decisions.

We are Builders. We are Owners. We are Curious. We are Positrons.

Twilio.org

We believe communications play a critical role in solving some of the world’s toughest social

challenges. Through Twilio.org, which is a part of our company and not a separate legal entity, we donate
and sell our products at a reduced rate to social impact organizations and provide grant funding to help
scale organizations’ mission. In 2015, we reserved 1% of Twilio’s common stock to fund Twilio.org. We
have periodically replenished that initial reserve and as of December 31, 2021, the number of shares of
Twilio Class A common stock set aside for Twilio.org operations was 618,857. We started Twilio.org so
that more people around the world have the opportunity to thrive. In 2021, over 7,500 social impact
organizations used Twilio products and funding to reach more than 500 million people worldwide. 2021
marked another year of living through the COVID-19 pandemic and Twilio products and funding were
used by over 1,200 organizations to provide more than 300 million people with vaccine and COVID-19
related information.

Information on our key Environmental, Social and Governance (“ESG”) programs, goals and
commitments, and certain metrics can be found in our annual Impact Report, available on our website at
https://investors.twilio.com/governance. Website references throughout this document are provided for
convenience only, and the content on the referenced websites is not incorporated by reference into this
report. While we believe that our ESG goals align with our long-term growth strategy and financial and
operational priorities, they are aspirational and may change, and there can be no assurance that they will
be met.

Our Employees and Human Capital Resources

As of December 31, 2021, we had a total of 7,867 employees, including 2,964 employees located

outside of the U.S. None of our U.S. employees are represented by a labor union with respect to their
employment. Employees in certain of our non-U.S. subsidiaries have the benefits of collective bargaining
arrangements at the national level. We consider our relations with our employees to be good and have not
experienced interruptions of operations or work stoppages due to labor disagreements.

Diversity, Equity and Inclusion

We are driving a diversity, equity and inclusion (“DEI”) strategy based on the principles of antiracism.

At Twilio, we use “antiracism” as an umbrella term for actively identifying and eliminating racism/
oppression by changing systems, organizational structures, policies, practices, and attitudes, so that power
is shared equitably. By educating and empowering Twilions to think and operate through an antiracist lens,
we’ll be able to build a more diverse workforce, promote equity for all communities in the workplace and
foster safe, inclusive environments.

Following our commitment to become an antiracist organization, we began the work to embed and
operationalize antiracism across the business, with a strong focus on education. In 2021, over 100 senior
Twilio executives participated in an antiracism workshop, with continued learning planned in 2022. We are
growing our partnerships with global organizations to help us find, grow, and keep diverse talent in various
demographics, regions, and countries. We are coordinating antiracist learning opportunities through
employee resource group (“ERG”) specific programming and events. Lastly, we continue to maintain
healthy pay parity, ensuring that employees with the same job and location are paid fairly relative to one
another, regardless of gender or race.

We will continue to grow our DEI resources and global footprint to make sure DEI scales along with

the business. Most recently, we expanded the DEI team and launched new ERG chapters globally. This
will ensure we are translating antiracism and amplifying DEI efforts across all teams and regions.

Compensation and Benefits

Twilio is committed to delivering a comprehensive compensation and benefits program that provides
support for all of our employees’ well-being. We provide competitive compensation and benefits to attract
and retain talented employees, including offering market-competitive salaries, sales commissions for our
sales teams, and equity. We generally offer full-time employees equity at the time of hire and through
annual equity grants, as well as provide an employee stock purchase plan, to foster a strong sense of
ownership and engage our employees in being committed to our long-term success.

We ensure that our compensation is fair for all employees, regardless of classifications, such as race

and gender. We routinely run a rigorous statistical analysis to ensure compensation is fair, taking into
account factors that should impact pay, like role, level, location and performance.

Our full-time employees are eligible to receive, subject to the satisfaction of certain eligibility

requirements, our comprehensive benefits package including our medical, dental and vision insurance and
life and disability insurance plans. In addition, we provide time off, as well as maintain a tax-qualified
401(k) retirement plan that provides eligible U.S. employees with an opportunity to save for retirement on
a tax-advantaged basis. In 2021, we matched 50% of the first 6% of contributions by plan participants,
subject to annual contribution limits set forth in the Internal Revenue Code of 1986, as amended.

In structuring these benefit plans, we seek to provide an aggregate level of benefits that are

comparable to those provided by similar companies.

COVID-19 Response

To support employee well-being, Twilio established a number of new programs in response to the
COVID-19 pandemic and the transition to full-time work from home. We established No Meeting Fridays,
created flexible work schedule options, gave employees a home office stipend, a caregiver stipend, free
Care.com membership and paid time off through our COVID-19 Support Leave to care for themselves or
family members impacted by COVID-19.

Research and Development

Our research and development efforts are focused on building a trusted, smart engagement platform

and enhancing our existing products and developing new products and features.

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Our research and development organization is predominantly built around small development teams.
Our small development teams foster greater agility, which enables us to develop new, innovative products
and make rapid changes to our infrastructure that increase resiliency and operational efficiency. Our
development teams designed, built and continue to expand our customer engagement platform, our core
platforms stack and Super Network.

As of December 31, 2021, we had 3,103 employees in our research and development organization. We
intend to continue to invest in our research and development capabilities to extend our platform and bring
the power of contextual communications to a broader range of applications, geographies and customers.

Sales and Marketing

Our sales and marketing teams work together closely to drive awareness and adoption of our
platform, accelerate customer acquisition and generate revenue from customers. We have a strategy to
grow within our customers that we refer to as our “in and up” strategy. We get in to new customers
through our messaging and email products, often directly via developers, then build on those relationships
to grow our footprint with broader adoption and higher value products.

Our go-to-market model is primarily focused on initiating customer relationships by reaching and

serving the needs of developers. We are a pioneer of developer evangelism and education and have
cultivated a large global developer community. We reach developers through community events and
conferences, including our annual SIGNAL customer and developer conference, to demonstrate how
every developer can create differentiated applications incorporating communications using our products.

Once developers are introduced to our platform, we provide them with a low-friction trial experience.
By accessing our easy-to-configure APIs, extensive self-service documentation and customer support team,
developers can build our products into their applications and then test such applications during an initial
free trial period that we provide. Once they have decided to use our products beyond the initial free trial
period, customers provide their credit card information and only pay for the actual usage of our products,
for a majority of our products. Our Flex contact center platform is generally offered on a per user, per
month basis or on a usage basis per agent hour. Our email API is offered on a monthly subscription basis,
while our Marketing Campaigns product is priced based on the number of email contacts stored on our
platform and the number of monthly emails sent to those contacts through our email API. Our self-serve
pricing matrix is publicly available and it allows for customers to receive tiered discounts as their usage of
our products increases. As customers’ use of our products grows larger, some enter into negotiated
contracts with terms that dictate pricing, and typically include some level of minimum revenue
commitments. Historically, we have acquired the substantial majority of our customers through this self-
service model. As customers expand their usage of our platform, we expand our relationships with them to
include business leaders within their organizations.

We supplement our self-service model with account executives and customer success managers aimed

at engaging customers through a direct sales approach to expand usage and ensure satisfaction. To help
increase our awareness in the enterprise, we have expanded our marketing efforts through programs like
our Twilio Engage roadshow, where we seek to bring business leaders and developers together to discuss
the future of customer engagement. We have developed products to support this effort as well, like the
Twilio Enterprise Plan, which provides capabilities for advanced security, access management and granular
administration. Our sales organization targets technical leaders and business leaders who are seeking to
leverage software to drive superior customer engagement and competitive differentiation. As we educate
these leaders on the benefits of developing applications incorporating our products to differentiate their
business, they often consult with their developers regarding implementation. We believe that developers
are often advocates for our products as a result of our developer-focused approach. Our sales organization
includes sales development, inside sales, field sales, specialty sales and sales engineering personnel.

When potential customers do not have the available developer resources to build their own

applications, we refer them to either our technology partners who embed our products in the solutions that
they sell to other businesses (such as contact centers and sales force and marketing automation), or our
professional services team or outside consulting partners who provide consulting and development services
for organizations that have limited software development expertise to build our platform into their
software applications.

As of December 31, 2021, we had 3,661 employees in our sales and marketing organization.

Customer Support

We have designed our products and platform to be self-service and to require minimal customer
support. To enable this, we provide all of our users with helper libraries, comprehensive documentation,
how-tos and tutorials. We supplement and enhance these tools with the participation of our engaged
developer community. In addition, we provide support options to address the individualized needs of our
customers. All developers get free support and system status notifications. Our developers can also engage
with the broader Twilio community to resolve issues.

We also offer three paid tiers of support with increasing levels of availability and guaranteed response

times. Our highest tier plan, intended for our largest customers, includes a dedicated support engineer,
duty manager coverage and quarterly status reviews. Our support model is global, with 24x7 coverage and
support offices located throughout the world, with our larger offices located in the U.S., Ireland,
Colombia, India, and Singapore. We currently derive an insignificant amount of revenue from fees for
customer support.

We also offer professional services which provide in-depth, hands-on, fee-based packages of advisory,

software architecture, integration and coding services to existing and prospective customers and partners
to optimize their use of the Twilio platform. Our goal is to help our customers achieve business results
faster. Offerings include services for implementing contact center solutions, email implementation and
deliverability, customer data platform design, and configuration and integration of communications
capabilities.

Competition

The market for cloud communication platforms is rapidly evolving and increasingly competitive. We

believe that the principal competitive factors in our market are:

• completeness of offering;

• credibility with developers;

• global reach;

• ease of integration and programmability;

• product features;

• platform scalability, reliability, security and performance;

• brand awareness and reputation;

• the strength of sales and marketing efforts;

• customer support; and,

• the cost of deploying and using our products.

We believe that we compete favorably on the basis of the factors listed above. We believe that none of

our competitors currently competes directly with us across all of our product offerings.

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Our competitors fall into four primary categories:

• legacy on-premises vendors;

• regional network service providers that offer limited developer functionality on top of their own

physical infrastructure;

• smaller software companies that compete with portions of our product line; and,

• SaaS companies and cloud platform vendors that offer prepackaged applications and platforms.

Some of our competitors have greater financial, technical and other resources, greater name
recognition, larger sales and marketing budgets and larger intellectual property portfolios. As a result,
certain of our competitors may be able to respond more quickly and effectively than we can to new or
changing opportunities, technologies, standards or customer requirements. In addition, some competitors
may offer products or services that address one or a limited number of functions at lower prices, with
greater depth than our products or in geographies where we do not operate. With the introduction of new
products and services and new market entrants, we expect competition to intensify in the future. Moreover,
as we expand the scope of our platform, we may face additional competition.

Intellectual Property

We rely on a combination of patent, copyright, trademark and trade secret laws in the U.S. and other

jurisdictions, as well as license agreements and other contractual protections, to protect our proprietary
technology. We also rely on a number of registered and unregistered trademarks to protect our brand.

As of December 31, 2021, in the U.S., we had been issued 197 patents, which expire between 2029 and
2040. As of such date, we also had 36 issued patents in foreign jurisdictions, all of which are related to U.S.
patents and patent applications. We have also filed various applications for protection of certain aspects of
our intellectual property in the U.S. and internationally. In addition, as of December 31, 2021, we had 50
trademarks registered in the U.S. and 416 trademarks registered in foreign jurisdictions.

We further seek to protect our intellectual property rights by implementing a policy that requires our
employees and independent contractors involved in development of intellectual property on our behalf to
enter into agreements acknowledging that all works or other intellectual property generated or conceived
by them on our behalf are our property, and assigning to us any rights, including intellectual property
rights, that they may claim or otherwise have in those works or property, to the extent allowable under
applicable law.

Despite our efforts to protect our technology and proprietary rights through intellectual property
rights, licenses and other contractual protections, unauthorized parties may still copy or otherwise obtain
and use our software and other technology. In addition, we intend to continue to expand our international
operations, and effective intellectual property, copyright, trademark and trade secret protection may not
be available or may be limited in foreign countries. Any significant impairment of our intellectual property
rights could harm our business or our ability to compete. Further, companies in the communications and
technology industries may own large numbers of patents, copyrights and trademarks and may frequently
threaten litigation, or file suit against us based on allegations of infringement or other violations of
intellectual property rights. We currently are subject to, and expect to face in the future, allegations that
we have infringed the intellectual property rights of third parties, including our competitors and
non-practicing entities.

Regulatory

We are subject to a number of U.S. federal and state and foreign laws and regulations that involve

matters central to our business. These laws and regulations may involve privacy, data protection,
intellectual property, competition, telecommunications, broadband, Voice over Internet Protocol

(“VoIP”), consumer protection, export taxation or other subjects. Many of the laws and regulations to
which we are subject are still evolving and being tested in courts and by regulatory authorities and could be
interpreted in ways that could harm our business. In addition, the application and interpretation of these
laws and regulations often are uncertain, particularly in the new and rapidly evolving industry in which we
operate. Because U.S., federal, state and foreign laws and regulations have continued to develop and
evolve rapidly, it is possible that we or our products or our platform may not be, or may not have been,
compliant with each such applicable law or regulation.

For example, the General Data Protection Regulation (“GDPR”) and the United Kingdom’s GDPR
(“UK GDPR”) impose strict requirements for processing the personal information of individuals located,
respectively within the European Economic Area (“EEA”) and the United Kingdom (“UK”).
Noncompliance with the GDPR and UK GDPR can result in, for example, bans on data processing and
fines of up to the greater of 20 million euros (£17.5 million for the UK GDPR) or 4% of annual global
revenue. Further, individuals may initiate litigation related to our processing of their personal information.
Given the breadth and depth of changes in data protection obligations, meeting the requirements of
GDPR has required significant time and resources, including a review of our technology and systems
currently in use against the requirements of GDPR. Our actual or perceived failure to comply with laws,
regulations or contractual commitments regarding privacy, data protection and data security could lead to
costly legal action, adverse publicity, significant liability and decreased demand for our services, which
could adversely affect our business, results of operations and financial condition.

In addition, laws such as the Telephone Consumer Protection Act of 1991 (“TCPA”), restrict
telemarketing and the use of automatic SMS text messages without explicit customer consent. The scope
and interpretation of the laws that are or may be applicable to the delivery of text messages are
continuously evolving and developing. If we do not comply with these laws or regulations, or if our
customers fail to do so, we could face direct liability.

Compliance with these laws and regulations has not had, and is not expected to have, a material effect

on our capital expenditures, results of operations and competitive position as compared to prior periods,
and we do not currently anticipate material capital expenditures for environmental control facilities, of
which we currently have none. For additional information about government regulation applicable to our
business, see Part I, Item 1A, “Risk Factors” in this Annual Report on Form 10-K.

Corporate Information

Twilio Inc. was incorporated in Delaware in March 2008. Our principal executive offices are located at

101 Spear Street, First Floor, San Francisco, California 94105, and our telephone number is (415)
390-2337. Our website address is www.twilio.com. Information contained on, or that can be accessed
through, our website does not constitute part of this Annual Report on Form 10-K.

Twilio, the Twilio logo and other trademarks or service marks of Twilio appearing in this Annual
Report on Form 10-K are the intellectual property of Twilio. Trade names, trademarks and service marks
of other companies appearing in this Annual Report on Form 10-K are the intellectual property of their
respective holders.

Information about Geographic Revenue

Information about geographic revenue is set forth in Note 12 of our Notes to Consolidated Financial

Statements included in Part II, Item 8, “Financial Statements and Supplementary Data” of this Annual
Report on Form 10-K.

Available Information

Our filings are available to be viewed and downloaded free of charge through our investor relations

website after we file them with the Securities and Exchange Commission (“SEC”). Our filings include our

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Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, our Proxy Statement for our annual
meeting of stockholders, Current Reports on Form 8-K and other filings with the SEC. Our investor
relations website is located at http://investors.twilio.com. The SEC also maintains an Internet website that
contains periodic and current reports, proxy statements and other information about issuers, like us, that
file electronically with the SEC. The address of that website is www.sec.gov.

We webcast our earnings calls and certain events we participate in or host with members of the
investment community on our investor relations website. Additionally, we provide notifications of news or
announcements regarding our financial performance, including SEC filings, investor events, press and
earnings releases, and blogs as part of our investor relations website. Further corporate governance
information, including our corporate governance guidelines and code of business conduct and ethics, is
also available on our investor relations website under the heading “Governance.” The contents of our
websites are not intended to be incorporated by reference into this Annual Report on Form 10-K or in any
other report or document we file with the SEC, and any references to our websites are intended to be
inactive textual references only.

Item 1A. Risk Factors

A description of the risks and uncertainties associated with our business is set forth below. You should
carefully consider the risks and uncertainties described below, together with all of the other information in this
Annual Report on Form 10-K, including Part II, Item 7, “Management’s Discussion and Analysis of Financial
Condition and Results of Operations” and our consolidated financial statements and related notes appearing
elsewhere in this Annual Report on Form 10-K. The risks and uncertainties described below may not be the only
ones we face. If any of the risks actually occur, our business, financial condition, results of operations and
prospects could be materially and adversely affected. In that event, the market price of our Class A common
stock could decline.

Risks Related to Our Business and Our Industry

The global COVID-19 pandemic may adversely impact our business, results of operations and financial condition.

The rapid spread of COVID-19 globally has in the past disrupted, and may continue to disrupt, our
day-to-day operations and the operations of our customers, partners and service providers for an indefinite
period of time, including as a result of changing public health recommendations, travel restrictions and
limitations, the duration, spread and severity and potential recurrence of the virus and its variants, as well
as the efficacy of vaccines and vaccine distribution and the timing and trajectory of the economic recovery,
all of which could negatively impact our business and results of operations and financial condition. While
the global economy is reopening in various parts of the world, some countries and locations are reinstating
lockdowns and other restrictions that make a recovery difficult to predict. This may result in differing
levels of demand for our products as the priorities, resources, financial conditions and economic outlook of
our customers, partners and service providers change, which could adversely affect or increase the
volatility of our financial results. Certain industries were initially more negatively impacted by COVID-19,
while others were positively impacted. It has been and, until the COVID-19 pandemic is contained, will
continue to be more difficult for us to forecast usage levels and predict revenue trends for the more
adversely impacted industries. Any prolonged contractions in industries historically impacted by
COVID-19, along with any effects on supply chain or on other industries in which our customers, partners
and service providers operate, could adversely impact our business, results of operations and financial
condition.

Additionally the COVID-19 pandemic has adversely affected global economic and market conditions,

including causing labor shortages, supply chain disruptions and inflation, which are likely to continue for
an extended period, and which could result in decreased business spending by our customers and
prospective customers and business partners and third-party business partners, reduced demand for our

solutions, lower renewal rates by our customers, longer or delayed sales cycles, including customers and
prospective customers delaying contract signing or contract renewals, or reducing budgets or minimum
commitments related to the product and services that we offer, all of which could have an adverse impact
on our business operations and financial condition. Specifically, we often enter into annual or multi-year,
minimum commitment arrangements with our customers. If customers fail to pay us or reduce their
spending with us, we may be adversely affected by an inability to collect amounts due, the cost of enforcing
the terms of our contracts, including litigation, or a reduction in revenue. The continuing pandemic could
also result in constrained supply or reduced customer demand and willingness to enter into or renew
contracts with us, any of which could adversely impact our business, results of operations and overall
financial performance in future periods. While we have developed and continue to develop plans to help
mitigate the potential negative impact of the pandemic on our business, these efforts may not be effective,
and a protracted economic downturn, including due to factors such as labor shortages, supply chain
disruptions and inflation, may limit the effectiveness of our mitigation efforts.

In addition, as companies continue to support a fully remote workforce, and begin to adapt to hybrid

work environments, and as individuals increasingly utilize voice, video and messaging for their
communication needs, there will be increased strain and demand for telecommunications infrastructure,
including our voice, video and messaging products. Supporting increased demand will require us to make
additional investments to increase network capacity, the availability of which may be limited. For example,
if the data centers that we rely on for our cloud infrastructure and the network service providers that we
interconnect with are unable to keep up with capacity needs or if governmental or regulatory authorities
determine to limit our bandwidth, customers may experience delays, interruptions or outages in service.
From time to time, including during the COVID-19 pandemic, our data center suppliers and our network
service providers have had some outages which resulted in disruptions to service for some of our
customers. Such traffic management measures could result in customers experiencing delays, interruptions
or outages in services. Any of these events could harm our reputation, erode customer trust, cause
customers to stop using our products, impair our ability to increase revenue from existing customers,
impair our ability to grow our customer base, subject us to financial penalties and liabilities under our
service level agreements and otherwise harm our business, results of operations and financial condition.

To the extent that the COVID-19 pandemic harms our business, results of operations and financial

condition, many of the other risks described in this “Risk Factors” section will be exacerbated.

We have experienced rapid growth and expect our growth to continue, and if we fail to effectively manage our
growth, then our business, results of operations and financial condition could be adversely affected.

We have experienced substantial growth in our business since inception. For example, our headcount

has grown from 4,629 employees on December 31, 2020 to 7,867 employees on December 31, 2021. We
have moved to a virtual on-boarding process since the imposition of COVID-19 restrictions on certain
business activities. In addition, we are rapidly expanding our international operations. Our international
headcount grew from 1,369 employees as of December 31, 2020 to 2,964 employees as of December 31,
2021. We expect to continue to expand our international operations in the future. We have also
experienced significant growth in the number of customers, usage and amount of data that our platform
and associated infrastructure support. This growth has placed and may continue to place significant
demands on our corporate culture, operational infrastructure and management, particularly in light of
virtual on-boarding.

We believe that our corporate culture has been a critical component of our success. We have invested
substantial time and resources in building our team and nurturing our culture. As we expand our business
in the U.S. and non-U.S. regions and mature as a public company, we may find it difficult to maintain our
corporate culture while managing this growth. In addition, the COVID-19 pandemic may have long-term
effects on the nature of the office environment and remote working. Our employees generally continue to
work from home as we continue a phased reopening of offices and, in February 2021, we announced a new

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Open Work hybrid work approach, under which most employees will have a choice about where and how
they work. We face uncertainty as to whether Open Work, and any adjustments we may make to our
model, will meet the needs and expectations of our workforce. Any failure to preserve the key aspects of
our culture as we manage our anticipated growth and organizational changes could hurt our chance for
future success, including our ability to recruit and retain employees, and effectively focus on and pursue
our corporate objectives. This, in turn, could adversely affect our business, results of operations and
financial condition.

In addition, as we have rapidly grown, our organizational structure has become more complex. In

order to manage these increasing complexities, we will need to continue to scale and adapt our
operational, financial and management controls, as well as our reporting systems and procedures. The
expansion of our systems and infrastructure will require us to commit substantial financial, operational and
management resources before our revenue increases and without any assurances that our revenue will
increase.

Finally, if this growth continues, it could strain our ability to maintain reliable service levels for our
customers. If we fail to achieve the necessary level of efficiency in our organization as we grow, then our
business, results of operations and financial condition could be adversely affected.

Our quarterly results may fluctuate, and if we fail to meet securities analysts’ and investors’ expectations, then the
trading price of our Class A common stock and the value of your investment could decline substantially.

Our results of operations, including the levels of our revenue, cost of revenue, gross margin and

operating expenses, have fluctuated from quarter to quarter in the past and may continue to vary
significantly in the future. These fluctuations are a result of a variety of factors, many of which are outside
of our control, and may be difficult to predict and may or may not fully reflect the underlying performance
of our business. If our quarterly results of operations or forward-looking quarterly and annual financial
guidance fall below the expectations of investors or securities analysts, then the trading price of our
Class A common stock could decline substantially. Some of the important factors that may cause our
results of operations to fluctuate from quarter to quarter include:

• the impact of COVID-19 on our customers, partners and service providers, our pace of hiring and

the global economy in general;

• our ability to retain and increase revenue from existing customers and attract new customers;

• fluctuations in the amount of revenue from our Active Customer Accounts;

• our ability to attract and retain enterprises and international organizations as customers;

• our ability to introduce new products and enhance existing products;

• competition and the actions of our competitors, including pricing changes and the introduction of

new products, services and geographies;

• changes in laws, industry standards, regulations or regulatory enforcement in the United States or

internationally, such as the invalidation of the EU-U.S. Privacy Shield by the Court of Justice of the
European Union, the implementation and enforcement of new global privacy laws, such as the
General Data Protection Regulation (“GDPR”), the California Consumer Privacy Act of 2018
(“CCPA”) and Brazil’s General Data Protection Law (Lei Geral de Proteção de Dados Pessoais)
(Law No. 13,709/2018), and the adoption of SHAKEN/STIR and other robocalling prevention and
anti-spam standards, all of which increase compliance costs;

• changes to the policies or practices of third-party platforms, such as the Apple App Store and the

Google Play Store, including with respect to Apple’s Identifier for Advertisers (IDFA), which helps
advertisers assess the effectiveness of their advertising efforts, and with respect to transparency
regarding data processing;

• the number of new employee hires during a particular period;

• changes in network service provider fees that we pay in connection with the delivery of

communications on our platform;

• changes in cloud infrastructure fees that we pay in connection with the operation of our platform;

• changes in our pricing as a result of our optimization efforts or otherwise;

• reductions in pricing as a result of negotiations with our larger customers;

• the rate of expansion and productivity of our sales force, including our enterprise sales force, which

has been a focus of our recent expansion efforts;

• changes in the size and complexity of our customer relationships;

• the length and complexity of the sales cycle for our services, especially for sales to larger

enterprises, government and regulated organizations;

• change in the mix of products that our customers use during a particular period;

• change in the revenue mix of U.S. and international products;

• the amount and timing of operating costs and capital expenditures related to the operations and

expansion of our business, including investments in our international expansion, additional systems
and processes and research and development of new products and services;

• significant security breaches of, technical difficulties with, or interruptions to, the delivery and use

of our products on our platform;

• expenses in connection with mergers, acquisitions or other strategic transactions and the follow-on

costs of integration;

• the timing of customer payments and any difficulty in collecting accounts receivable from

customers;

• general economic conditions that may adversely affect a prospective customer’s ability or

willingness to adopt our products, delay a prospective customer’s adoption decision, reduce the
revenue that we generate from the use of our products or affect customer retention;

• labor shortages, supply chain disruptions and rising inflation and our ability to control costs,

including our operating expenses;

• our ability to attract and retain qualified employees and key personnel;

• changes in foreign currency exchange rates and our ability to effectively hedge our foreign currency

exposure;

• extraordinary expenses such as litigation or other dispute-related settlement payments;

• sales tax and other tax determinations by authorities in the jurisdictions in which we conduct

business;

• the impact of new accounting pronouncements; and

• fluctuations in stock-based compensation expense.

The occurrence of one or more of the foregoing and other factors may cause our results of operations

to vary significantly. As such, we believe that quarter-to-quarter comparisons of our results of operations
may not be meaningful and should not be relied upon as an indication of future performance. In addition,
a significant percentage of our operating expenses is fixed in nature and is based on forecasted revenue
trends. Accordingly, in the event of a revenue shortfall, we may not be able to mitigate the negative impact

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on our income (loss) and margins in the short term. If we fail to meet or exceed the expectations of
investors or securities analysts, then the trading price of our Class A common stock could fall substantially,
and we could face costly lawsuits, including securities class action suits.

Additionally, global pandemics such as COVID-19 as well as certain large scale events, such as major

elections and sporting events, can significantly impact usage levels on our platform, which has, and could in
the future, cause fluctuations in our results of operations. We expect that significantly increased usage of
all communications platforms, including ours, during certain seasonal and one-time events could impact
delivery and quality of our products during those events. We also tend to experience increased expenses in
connection with the hosting of SIGNAL, which we plan to continue to host annually. Such annual and
one-time events may cause fluctuations in our results of operations and may impact both our revenue and
operating expenses.

If we are not able to maintain and enhance our brand and increase market awareness of our company and
products, then our business, results of operations and financial condition may be adversely affected.

We believe that maintaining and enhancing the “Twilio” brand identity and increasing market

awareness of our company and products, particularly among developers, is critical to achieving widespread
acceptance of our platform, to strengthen our relationships with our existing customers and to our ability
to attract new customers. The successful promotion of our brand will depend largely on our continued
marketing efforts, our ability to continue to offer high quality products, and our ability to successfully
differentiate our products and platform from competing products and services. Our brand promotion and
thought leadership activities may not be successful or yield increased revenue. In addition, independent
industry analysts often provide reviews of our products and competing products and services, which may
significantly influence the perception of our products in the marketplace. If these reviews are negative or
not as strong as reviews of our competitors’ products and services, then our brand may be harmed.

From time to time, our customers have complained about our products, such as complaints about our

pricing and customer support. If we do not handle customer complaints effectively, then our brand and
reputation may suffer, our customers may lose confidence in us and they may reduce or cease their use of
our products. In addition, many of our customers post and discuss on social media about Internet-based
products and services, including our products and platform. Our success depends, in part, on our ability to
generate positive customer feedback and minimize negative feedback on social media channels where
existing and potential customers seek and share information. If actions we take or changes we make to our
products or platform upset these customers, then their online commentary could negatively affect our
brand, reputation and customer trust. Complaints or negative publicity about us, our products or our
platform could adversely impact our ability to attract and retain customers, and otherwise harm our
business, results of operations and financial condition.

The promotion of our brand also requires us to make substantial expenditures, and we anticipate that

these expenditures will increase as our market becomes more competitive and as we expand into new
markets. To the extent that these activities increase revenue, this revenue still may not be enough to offset
the increased expenses we incur, including, but not limited to, as a result of recent inflationary pressures.

The market for our products and platform continues to evolve, and may decline or experience limited growth, and
is dependent in part on developers continuing to adopt our platform and use our products.

We were founded in 2008, and we have been developing and providing a cloud-based platform that

enables developers and organizations to integrate voice, messaging, video and email communications
capabilities into their software applications. This market continues to evolve and is subject to a number of
risks and uncertainties. We believe that our revenue currently constitutes a significant portion of the total
revenue in this market, and therefore, we believe that our future success will depend in large part on the
growth, if any, and evolution of this market. If developers and organizations do not recognize the need for

and benefits of our products and platform, they may decide to adopt alternative products and services to
satisfy some portion of their business needs. In order to grow our business and extend our market position,
we intend to focus on educating developers and other potential customers about the benefits of our
products and platform, expanding the functionality of our products and bringing new technologies to
market to increase market acceptance and use of our platform. Our ability to expand the market that our
products and platform address depends upon a number of factors, including the cost, performance and
perceived value associated with such products and platform. The market for our products and platform
could fail to grow significantly or there could be a reduction in demand for our products as a result of a
lack of developer acceptance, technological challenges, competing products and services, decreases in
spending by current and prospective customers, weakening economic conditions, including due to labor
shortages, supply chain disruptions and inflationary pressures, and other causes. If our market does not
experience significant growth or demand for our products decreases, then our business, results of
operations and financial condition could be adversely affected.

Our actual or perceived failure to comply with increasingly stringent laws, regulations and contractual obligations
relating to privacy, data protection and data security could harm our reputation and subject us to significant fines
and liability or loss of business.

We and our customers are subject to numerous domestic (for example, CCPA in California) and
foreign (for example, the GDPR in the EU) privacy, data protection and data security laws and regulations
that restrict the collection, use, disclosure and processing of personal information, including financial and
health data. These laws and regulations are evolving, are being tested in courts, may result in increasing
regulatory and public scrutiny of our practices relating to personal information and may increase our
exposure to regulatory enforcement action, sanctions and litigation.

The CCPA imposes obligations on businesses to which it applies. These obligations include, but are
not limited to, providing specific disclosures in privacy notices and affording California residents certain
rights related to their personal information. The CCPA allows for statutory fines for noncompliance. In
addition, it is anticipated that the California Privacy Rights Act of 2020 (“CPRA”), effective January 1,
2023, will expand the CCPA. Similar laws have been enacted or been proposed at the state and federal
levels. For example, Virginia and Colorado have each passed laws similar to but different from the CPRA
that take effect in 2023. If we become subject to new privacy, data protection and data security laws, the
risk of enforcement action against us could increase because we may become subject to additional
obligations, and the number of individuals or entities that can initiate actions against us may increase
(including individuals, via a private right of action, and state actors).

Outside the United States, an increasing number of laws, regulations, and industry standards apply to

privacy, data protection and data security. For example, the GDPR and the United Kingdom’s GDPR
(“UK GDPR”) impose strict requirements for processing the personal information of individuals located,
respectively within the European Economic Area (“EEA”) and the United Kingdom (“UK”). For
example, under the GDPR, government regulators may impose temporary or definitive bans on data
processing, as well as fines. Further, individuals may initiate litigation related to our processing of their
personal information. As another example, the General Data Protection Law (Lei Geral de Proteção de
Dados Pessoais, or “LGPD”) (Law No. 13,709/2018) may apply to our operations. The LGPD broadly
regulates processing of personal information of individuals in Brazil and imposes compliance obligations
and penalties comparable to those of the GDPR.

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
unexpected changes, including the potential for various regulatory or other governmental bodies to enact
new or additional laws or regulations, to issue rulings that invalidate prior laws or regulations, or to
increase penalties significantly.

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Similarly, with our registration as an interconnected VoIP provider with the Federal Communications

Commission (“FCC”), we also must comply with privacy laws associated with customer proprietary
network information (“CPNI”) rules in the U.S. If we fail to maintain compliance with these requirements,
we could be subject to regulatory audits, civil and criminal penalties, fines and breach of contract claims, as
well as reputational damage, which could impact the willingness of customers to do business with us.

In addition to our legal obligations, our contractual obligations relating to privacy, data protection and
data security have become increasingly stringent due to changes in laws and regulations and the expansion
of our offerings. Certain privacy, data protection and data security laws, such as the GDPR and the CCPA,
require our customers to impose specific contractual restrictions on their service providers. In addition, we
have begun to support customer workloads that involve the processing of protected health information and
are required to sign business associate agreements (“BAAs”) with customers that subject us to the
requirements under the U.S. Health Insurance Portability and Accountability Act of 1996 and the U.S.
Health Information Technology for Economic and Clinical Health Act as well as state laws that govern
health information.

Our actual or perceived failure to comply with laws, regulations or contractual commitments
regarding privacy, data protection and data security could lead to costly legal action, adverse publicity,
significant liability, and decreased demand for our services, which could adversely affect our business,
results of operations and financial condition.

As a cumulative example of these risks, because our primary data processing facilities are currently in
the U.S., we have experienced hesitancy, reluctance, or refusal by European or multinational customers to
continue to use our services due to the potential risk posed to such customers as a result of the Court of
Justice July 2020 ruling in the “Schrems II” case, as well as related guidance from the European Data
Protection Board. For example, absent appropriate safeguards or other circumstances, the GDPR and laws
in Switzerland and the UK generally restrict the transfer of personal information to countries outside of
the EEA, such as the United States, that the European Commission does not consider as providing an
adequate level of privacy, data protection and data security. If we cannot implement a valid mechanism for
cross-border data transfers, we may face increased exposure to regulatory actions, substantial fines, and
injunctions against processing or transferring personal information from Europe or elsewhere. The
inability to import personal information to the United States could significantly and negatively impact our
business operations; limit our ability to collaborate with parties that are subject to data privacy and security
laws; or require us to increase our personal information processing capabilities in Europe and/or elsewhere
at significant expense. We and our customers are at risk of enforcement actions taken by an EU data
protection authority during such time Twilio continues to require data transfers from the EEA for the
provision of our services. While we are actively working to increase our data processing capabilities in
Europe and other countries to limit or eliminate the need for data transfers out of the EEA, if we are
unable to increase those capabilities quickly enough, and other valid solutions for personal information
transfers to the United States or other countries are not available or are difficult to implement in the
interim, we will likely face continuing reluctance from European and multinational customers to use our
services and increased exposure to regulatory actions, substantial fines and injunctions against processing
or transferring personal information from Europe.

Our business depends on customers increasing their use of our products, and a loss of customers or decline in
their use of our products could adversely affect our business, results of operations and financial condition.

Our ability to grow and generate incremental revenue depends, in part, on our ability to maintain and

grow our relationships with existing customers (including any customers acquired in connection with our
acquisitions) and to have them increase their usage of our platform. If our customers do not increase their
use of our products, then our revenue may decline, and our results of operations may be harmed.
Customers are charged based on the usage of our products. Most of our customers do not have long-term
contractual financial commitments to us and, therefore, most of our customers may reduce or cease their

use of our products at any time without penalty or termination charges. Customers may terminate or
reduce their use of our products for any number of reasons, including if they are not satisfied with our
products, the value proposition of our products or our ability to meet their needs and expectations, or due
to the introduction of new competing products by competitors. For example, on February 26, 2021, a
critical feature enablement service on our platform became overloaded, which resulted in connection
issues across multiple products in our cloud communications platform that affected our customers for a
limited number of hours. The service disruption had a widespread impact on our customers’ ability to use
several of our products. We incurred certain costs associated with offering credits to our affected
customers, but the overall impact was not material to our business. To protect our system from similar
disruptions in the near term, we have significantly increased our server capacity and added additional
caching layers to accommodate usage spikes. We also have undertaken longer term improvements to
mitigate against future service disruptions, but there can be no guarantee that these actions or
improvements will be effective in preventing or reducing such service disruptions.

We cannot accurately predict customers’ usage levels, and the loss of customers or reductions in their

usage levels of our products may each have a negative impact on our business, results of operations and
financial condition and may cause our Dollar-Based Net Expansion Rate to decline in the future if
customers are not satisfied with our products, the value proposition of our products or our ability to meet
their needs and expectations. If a significant number of customers cease using, or reduce their usage of our
products, then we may be required to spend significantly more on sales and marketing than we currently
plan to spend in order to maintain or increase revenue from customers. Such additional sales and
marketing expenditures could adversely affect our business, results of operations and financial condition.

If we are unable to attract new customers in a cost-effective manner, then our business, results of operations and
financial condition would be adversely affected.

In order to grow our business, we must continue to attract new customers in a cost-effective manner.
We use a variety of marketing channels to promote our products and platform, such as developer events
and developer evangelism, as well as search engine marketing and optimization. We periodically adjust the
mix of our other marketing programs such as regional customer events, email campaigns, billboard
advertising and public relations initiatives. If the costs of the marketing channels we use increase
dramatically, then we may choose to use alternative and less expensive channels, which may not be as
effective as the channels we currently use. As we add to or change the mix of our marketing strategies, we
may need to expand into more expensive channels than those we are currently in, which could adversely
affect our business, results of operations and financial condition. We will incur marketing expenses before
we are able to recognize any revenue that the marketing initiatives may generate, and these expenses may
not result in increased revenue or brand awareness. We have made in the past, and may make in the
future, significant expenditures and investments in new marketing campaigns, and we cannot guarantee
that any such investments will lead to the cost-effective acquisition of additional customers. If we are
unable to maintain effective marketing programs, then our ability to attract new customers could be
adversely affected, our advertising and marketing expenses could increase substantially, and our results of
operations may suffer.

If we do not develop enhancements to our products and introduce new products that achieve market acceptance,
our business, results of operations and financial condition could be adversely affected.

Our ability to attract new customers and increase revenue from existing customers depends in part on
our ability to enhance and improve our existing products, increase adoption and usage of our products and
introduce new products. The success of any enhancements or new products depends on several factors,
including timely completion, adequate quality testing, actual performance quality, market-accepted pricing
levels and overall market acceptance. Enhancements and new products that we develop may not be
introduced in a timely or cost-effective manner, may contain errors or defects, may require reworking

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features and capabilities, may have interoperability difficulties with our platform or other products or may
not achieve the broad market acceptance necessary to generate significant revenue. Furthermore, our
ability to increase the usage of our products depends, in part, on the development of new use cases for our
products, which is typically driven by our developer community and may be outside of our control. We also
have invested, and may continue to invest, in the acquisition of complementary businesses, technologies,
services, products and other assets that expand the products that we can offer our customers. We may
make these investments without being certain that they will result in products or enhancements that will be
accepted by existing or prospective customers. Our ability to generate usage of additional products by our
customers may also require increasingly sophisticated and more costly sales efforts and result in a longer
sales cycle. In addition, adoption of new products or enhancements may put additional strain on our
customer support team, which could require us to make additional expenditures related to further hiring
and training. If we are unable to successfully enhance our existing products to meet evolving customer
requirements, increase adoption and usage of our products, develop new products, or if our efforts to
increase the usage of our products are more expensive than we expect, then our business, results of
operations and financial condition would be adversely affected.

The market in which we participate is intensely competitive, and if we do not compete effectively, our business,
results of operations and financial condition could be harmed.

The market for cloud communications is rapidly evolving, significantly fragmented and highly

competitive, with relatively low barriers to entry in some segments. The principal competitive factors in our
market include completeness of offering, credibility with developers, global reach, ease of integration and
programmability, product features, platform scalability, reliability, deliverability, security and performance,
brand awareness and reputation, the strength of sales and marketing efforts, customer support, as well as
the cost of deploying and using our products. Our competitors fall into four primary categories:

• legacy on-premises vendors;

• regional network service providers that offer limited developer functionality on top of their own

physical infrastructure;

• smaller software companies that compete with portions of our product line; and

• software-as a-service (“SaaS”) companies and cloud platform vendors that offer prepackaged

applications and platforms.

Some of our competitors and potential competitors are larger and have greater name recognition,

longer operating histories, more established customer relationships, larger budgets and significantly
greater resources than we do. In addition, they have the operating flexibility to bundle competing products
and services at little or no perceived incremental cost, including offering them at a lower price as part of a
larger sales transaction. As a result, our competitors may be able to respond more quickly and effectively
than we can to new or changing opportunities, technologies, standards or customer requirements. In
addition, some competitors may offer products or services that address one or a limited number of
functions at lower prices, with greater depth than our products or in different geographies. Our current
and potential competitors may develop and market new products and services with comparable
functionality to our products, and this could lead to us having to decrease prices in order to remain
competitive. Customers utilize our products in many ways and use varying levels of functionality that our
products offer or are capable of supporting or enabling within their applications. Customers that use many
of the features of our products or use our products to support or enable core functionality for their
applications may have difficulty or find it impractical to replace our products with a competitor’s products
or services, while customers that use only limited functionality may be able to replace our products more
easily with competitive offerings. Our customers also may choose to build some of the functionality our
products provide or establish direct connectivity with network service providers, which may limit or
eliminate their demand for our products.

With the introduction of new products and services and new market entrants, we expect competition

to intensify in the future. In addition, some of our customers may choose to use our products and our
competitors’ products at the same time. Further, customers and consumers may choose to adopt other
forms of electronic communications or alternative communication platforms.

Moreover, as we expand the scope of our products, we may face additional competition and, in some

cases, may find our products in competition with those of our customers, which could cause them to
replace our products with competitive offerings. If one or more of our competitors were to merge or
partner with another of our competitors or our suppliers, the change in the competitive landscape could
also adversely affect our ability to compete effectively. For example, certain of our competitors have
engaged in acquisition activity in 2021 and may continue to do so in the future. In addition, some of our
competitors have lower list prices than us, which may be attractive to certain customers even if those
products have different or lesser functionality. If we are unable to maintain our current pricing due to
competitive pressures, our margins will be reduced and our business, results of operations and financial
condition would be adversely affected. In addition, pricing pressures and increased competition generally
could result in reduced revenue, reduced margins, increased losses or the failure of our products to achieve
or maintain widespread market acceptance, any of which could harm our business, results of operations
and financial condition.

We have a history of losses and may not achieve or sustain profitability in the future.

We have incurred net losses in each year since our inception, including net losses of $949.9 million,

$491.0 million and $307.1 million in the years ended December 31, 2021, 2020 and 2019, respectively. We
had an accumulated deficit of $2.1 billion as of December 31, 2021. We will need to generate and sustain
increased revenue levels, and manage our operating expenses, in future periods to become profitable and,
even if we do, we may not be able to maintain or increase our level of profitability. We expect to continue
to expend substantial financial and other resources on, among other things:

• investments in our engineering team, improvements in security and data protection, the

development of new products, features and functionality and enhancements to our platform;

• sales and marketing, including the continued expansion of our direct sales organization and

marketing programs, especially for enterprises and for organizations outside of the United States,
and expanding our programs directed at increasing our brand awareness among current and new
developers;

• expansion of our operations and infrastructure, both domestically and internationally; and

• general administration, including legal, accounting and other expenses related to being a public

company.

Our efforts to grow our business may be costlier than we expect, and we may not be able to increase

our revenue enough to offset our increased operating expenses. We may incur significant losses in the
future for a number of reasons, including the other risks described herein, and unforeseen expenses,
difficulties, complications and delays and other unknown events. If we are unable to achieve and sustain
profitability, the value of our business and Class A common stock may significantly decrease.

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

Historically, we have relied on the adoption of our products by software developers through our self-

service model for a majority of our revenue. Our ability to increase our customer base, especially among
enterprises, and achieve broader market acceptance of our products will depend, in part, on our ability to
effectively organize, focus and train our sales and marketing employees.

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Our ability to convince enterprises to adopt our products will depend, in part, on our ability to attract

and retain sales employees with experience selling to enterprises. We believe that there is significant
competition for experienced sales professionals with the skills and technical knowledge that we require.
Our ability to achieve significant revenue growth in the future will depend, in part, on our ability to recruit,
train and retain a sufficient number of experienced sales professionals, particularly those with experience
selling to enterprises. In addition, even if we are successful in hiring qualified sales employees, new hires
require significant training and experience before they achieve full productivity, particularly for sales
efforts targeted at enterprises and new territories. Our recent hires and planned hires may not become as
productive as quickly as we expect, and we may be unable to hire or retain sufficient numbers of qualified
individuals in the future in the markets where we do business. Because we do not have a long history of
targeting our sales efforts at enterprises, we cannot predict whether, or to what extent, our sales will
increase as we organize and train our sales force or how long it will take for sales employees to become
productive.

As we seek to increase the adoption of our products by enterprises, including products like Flex, which

is primarily aimed at complex contact center implementations at larger companies, we expect to incur
higher costs and longer sales cycles. In the enterprise market segment, the decision to adopt our products
may require the approval of multiple technical and business decision makers, including legal, security,
compliance, procurement, operations and IT. In addition, while enterprise customers may quickly deploy
our products on a limited basis, before they will commit to deploying our products at scale, they often
require extensive education about our products and significant customer support time, engage in
protracted pricing negotiations and seek to secure readily available development resources. In addition,
sales cycles for enterprises are inherently more complex and less predictable than the sales through our
self-service model, and some enterprise customers may not use our products enough to generate revenue
that justifies the cost to obtain such customers. In addition, these complex and resource intensive sales
efforts could place additional strain on our product and engineering resources. Further, enterprises,
including some of our customers, may choose to develop their own solutions that do not include our
products. They also may demand reductions in pricing as their usage of our products increases, which
could have an adverse impact on our gross margin. As a result of our limited experience selling and
marketing to enterprises, our efforts to sell to these potential customers may not be successful. If we are
unable to increase the revenue that we derive from enterprises, then our business, results of operations
and financial condition may be adversely affected.

If we are unable to expand our relationships with existing technology partner customers and add new technology
partner customers, our business, results of operations and financial condition could be adversely affected.

We believe that the continued growth of our business depends in part upon developing and expanding

strategic relationships with technology partner customers. Technology partner customers embed our
software products in their solutions, such as software applications for contact centers and sales force and
marketing automation, and then sell such solutions to other businesses. When potential customers do not
have the available developer resources to build their own applications, we refer them to either our
technology partners who embed our products in the solutions that they sell to other businesses or our
consulting partners who provide consulting and development services for organizations that have limited
software development expertise to build our platform into their software applications.

As part of our growth strategy, we intend to expand our relationships with existing technology partner

customers and add new technology partner customers. If we fail to expand our relationships with existing
technology partner customers or establish relationships with new technology partner customers in a timely
and cost-effective manner, or at all, then our business, results of operations and financial condition could
be adversely affected. Additionally, even if we are successful at building these relationships but there are
problems or issues with integrating our products into the solutions of these customers, our reputation and
ability to grow our business may be harmed.

To deliver our products, we rely on network service providers and internet service providers for our network service
and connectivity, and disruption or deterioration in the quality of these services or changes in network service
provider fees that we pay in connection with the delivery of communications on our platform could adversely affect
our business, results of operations and financial condition.

We currently interconnect with network service providers around the world to enable the use by our
customers of our products over their networks. Although we are in the process of acquiring authorization
in many countries for direct access to phone numbers and for the provision of voice services on the
networks of network service providers, we expect that we will continue to rely on network service providers
for these services. Where we don’t have direct access to phone numbers, our reliance on network service
providers has reduced our operating flexibility, ability to make timely service changes and control quality of
service. In addition, the fees that we are charged by network service providers may change daily or weekly,
while we do not typically change our customers’ pricing as rapidly.

At times, network service providers have instituted additional fees due to regulatory, competitive or
other industry related changes that increase our network costs. For example, in early 2020, a major U.S.
mobile carrier introduced a new Application to Person (“A2P”) SMS service offering that adds a new fee
for A2P SMS messages delivered to its subscribers, and other U.S. mobile carriers have added or are in the
process of adding similar fees. While we have historically responded to these types of fee increases through
a combination of further negotiating efforts with our network service providers, absorbing the increased
costs or changing our prices to customers, there is no guarantee that we will continue to be able to do so in
the future without a material negative impact to our business. In the case of these new carriers A2P SMS
fees, after a short phase-in period where we absorbed the fees, we began on May 1, 2021 to pass these fees
directly through to our customers who are sending SMS messages to these carriers’ subscribers. We expect
that this will increase our revenue and cost of revenue, but will not impact the gross profit dollars received
for sending these messages. However, mathematically this will have a negative impact on our gross
margins. Additionally, our ability to respond to any new fees may be constrained if all network service
providers in a particular market impose equivalent fee structures, if the magnitude of the fees is
disproportionately large when compared to the underlying prices paid by our customers, or if the market
conditions limit our ability to increase the price we charge our customers.

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. If a significant
portion of our network service providers stop providing us with access to their infrastructure, fail to
provide these services to us on a cost-effective basis, cease operations, or otherwise terminate these
services, the delay caused by qualifying and switching to other network service providers could be time
consuming and costly and could adversely affect our business, results of operations and financial condition.
Further, if problems occur with our network service providers, it may cause errors or poor quality
communications with our products, and we could encounter difficulty identifying the source of the
problem. The occurrence of errors or poor quality communications on our products, whether caused by
our platform or a network service provider, may result in the loss of our existing customers or the delay of
adoption of our products by potential customers and may adversely affect our business, results of
operations and financial condition.

Further, we sometimes access network services through intermediaries who have direct access to
network service providers. Although we are in the process of securing direct connections with network
service providers in many countries, we expect that we will continue to rely on intermediaries for these
services. These intermediaries sometimes have offerings that directly compete with our products and may
stop providing services to us on a cost-effective basis. If a significant portion of these intermediaries stop
providing services or stop providing services on a cost-effective basis, our business could be adversely
affected.

We also interconnect with internet service providers around the world to enable the use of our email

products by our customers, and we expect that we will continue to rely on internet service providers for

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network connectivity going forward. Our reliance on internet service providers reduces our control over
quality of service and exposes us to potential service outages and rate fluctuations. If a significant portion
of our internet service providers stop providing us with access to their network infrastructure, fail to
provide access on a cost-effective basis, cease operations, or otherwise terminate access, the delay caused
by qualifying and switching to other internet service providers could be time consuming and costly and
could adversely affect our business, results of operations, and financial condition.

Our future success depends in part on our ability to drive the adoption of our products by international customers.

In the years ended December 31, 2021, 2020 and 2019, we derived 34%, 27% and 29% of our revenue,
respectively, from customer accounts located outside the United States. The future success of our business
will depend, in part, on our ability to expand our customer base worldwide. While we have been rapidly
expanding our sales efforts internationally, our experience in selling our products outside of the United
States is, and our ability to conduct business in local currencies in certain jurisdictions may be or is, limited.
Furthermore, our developer-first business model may not be successful or have the same traction outside
the United States. As a result, our investment in marketing our products to these potential customers may
not be successful. If we are unable to increase the revenue that we derive from international customers,
then our business, results of operations and financial condition may be adversely affected.

We are continuing to expand our international operations, which exposes us to significant risks.

We are continuing to expand our international operations to increase our revenue from customers
outside of the United States as part of our growth strategy. Between December 31, 2020 and December 31,
2021, our international headcount grew from 1,369 employees to 2,964 employees. We expect to open
additional international offices and hire employees to work at these offices in order to reach new
customers and gain access to additional technical talent. Operating in international markets requires
significant resources and management attention and will subject us to regulatory, economic and political
risks in addition to those we already face in the United States. Because of our limited experience with
international operations or with developing and managing sales in international markets, our international
expansion efforts may not be successful.

In addition, we will face risks in doing business internationally that could adversely affect our business,

including:

• any long–term impact from the United Kingdom’s withdrawal from the European Union,

commonly referred to as Brexit, which formally took effect on January 31, 2020. In particular, any
such long-term impact from Brexit on our business and operations will depend, in part, on the
outcome of the U.K.’s continuing negotiations on a number of matters not definitively addressed in
the UK-EU Trade and Cooperation Agreement and may require us to expend significant time and
expense to make adjustments to our business and operations;

• the difficulty of managing and staffing international operations and the increased operations, travel,

infrastructure and legal compliance costs associated with servicing international customers and
operating numerous international locations;

• our ability to effectively price our products in competitive international markets;

• new and different sources of competition or other changes to our current competitive landscape;

• understanding and reconciling different technical standards, data privacy and telecommunications
regulations, registration and certification requirements outside the United States, which could
prevent customers from deploying our products or limit their usage;

• our ability to comply with the GDPR and Brazil’s General Data Protection Law (Lei Geral de

Proteção de Dados Pessoais) (Law No. 13,709/2018), and laws, regulations and industry standards
relating to data privacy, data protection, data localization and data security enacted in countries and
other regions in which we operate or do business;

• potentially greater difficulty collecting accounts receivable and longer payment cycles;

• higher or more variable network service provider fees outside of the United States;

• the need to adapt and localize our products for specific countries;

• the need to offer customer support in various languages;

• difficulties in understanding and complying with local laws, regulations and customs in non-U.S.

jurisdictions;

• compliance with export controls and economic sanctions regulations administered by the

Department of Commerce’s Bureau of Industry and Security and the Treasury Department’s Office
of Foreign Assets Control;

• compliance with various anti-bribery and anti-corruption laws such as the Foreign Corrupt Practices

Act and United Kingdom Bribery Act of 2010;

• changes in international trade policies, tariffs and other non-tariff barriers, such as quotas and local

content rules;

• more limited protection for intellectual property rights in some countries;

• adverse tax consequences;

• fluctuations in currency exchange rates, which could increase the price of our products outside of
the United States, increase the expenses of our international operations and expose us to foreign
currency exchange rate risk;

• currency control regulations, which might restrict or prohibit our conversion of other currencies

into U.S. dollars;

• restrictions on the transfer of funds;

• deterioration of political relations between the United States and other countries;

• the impact of natural disasters and public health epidemics or pandemics such as COVID-19 on

employees, contingent workers, partners, travel and the global economy and the ability to operate
freely and effectively in a region that may be fully or partially on lockdown; and

• political or social unrest or economic instability in a specific country or region in which we operate,

which could have an adverse impact on our operations in that location.

Also, due to costs from our international expansion efforts and network service provider fees outside

of the United States, which generally are higher than domestic rates, our gross margin for international
customers is typically lower than our gross margin for domestic customers. As a result, our gross margin
may be impacted and fluctuate as we expand our operations and customer base worldwide.

Our failure to manage any of these risks successfully could harm our international operations, and

adversely affect our business, results of operations and financial condition.

Certain of our products are subject to telecommunications-related regulations, and future legislative or regulatory
actions could adversely affect our business, results of operations and financial condition.

As a provider of communications products, we are subject to existing or potential FCC regulations
relating to privacy, telecommunications, consumer protection and other requirements. In addition, the
extension of telecommunications regulations to our non-interconnected VoIP services could result in
additional federal and state regulatory obligations and taxes. We are also in discussions with certain
jurisdictions regarding potential sales and other taxes for prior periods that we may owe. In the event any
of these jurisdictions disagree with management’s assumptions and analysis, the assessment of our tax

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exposure could differ materially from management’s current estimates, which may increase our costs of
doing business and negatively affect the prices our customers pay for our services. If we do not comply with
FCC rules and regulations, we could be subject to FCC enforcement actions, fines, loss of licenses and
possibly restrictions on our ability to operate or offer certain of our products. Any enforcement action by
the FCC, which may be a public process, would hurt our reputation in the industry, could erode customer
trust, possibly impair our ability to sell our VoIP products to customers and could adversely affect our
business, results of operations and financial condition.

Certain of our products are subject to a number of FCC regulations and laws that are administered by

the FCC. Among others, we must comply (in whole or in part) with:

• the Communications Act of 1934, as amended, which regulates communications services and the

provision of such services;

• the Telephone Consumer Protection Act, which limits the use of automatic dialing systems for calls

and texts, artificial or prerecorded voice messages and fax machines;

• the Communications Assistance for Law Enforcement Act, which requires covered entities to assist

law enforcement in undertaking electronic surveillance;

• requirements to safeguard the privacy of certain customer information;

• payment of annual FCC regulatory fees and contributions to FCC-administered funds based on our

interstate and international revenues; and

• rules pertaining to access to our services by people with disabilities and contributions to the

Telecommunications Relay Services fund.

In addition, Congress and the FCC are attempting to mitigate the scourge of robocalls by requiring
participation in a technical standard called SHAKEN/STIR, which allows voice carriers to authenticate
caller ID, prohibiting malicious spoofing.

Similarly, in May 2021, the Biden Administration issued an Executive Order requiring federal

agencies to implement additional information technology security measures, including, among other
things, requiring agencies to adopt multifactor authentication and encryption for data at rest and in transit
to the maximum extent consistent with Federal records laws and other applicable laws. The Executive
Order will lead to the development of secure software development practices and/or criteria for a
consumer software labeling program, the criteria which will reflect a baseline level of secure practices, for
software that is developed and sold to the U.S. federal government. Software developers will be required
to provide visibility into their software and make security data publicly available. Due to this Executive
Order, federal agencies may require us to modify our cybersecurity practices and policies, thereby
increasing our compliance costs. If we are unable to meet the requirements of the Executive Order, our
ability to work with the U.S. government may be impaired and may result in a loss of revenue.

If we do not comply with any current or future rules or regulations that apply to our business, we
could be subject to substantial fines and penalties, and we may have to restructure our offerings, exit
certain markets or raise the price of our products. In addition, any uncertainty regarding whether
particular regulations apply to our business, and how they apply, could increase our costs or limit our
ability to grow.

As we continue to expand internationally, we have become subject to telecommunications laws and
regulations in the foreign countries where we offer our products. Internationally, we currently offer our
products in over 180 countries.

Our international operations are subject to country-specific governmental regulation and related
actions that have increased and will continue to increase our costs or impact our products and platform or
prevent us from offering or providing our products in certain countries. Moreover, the regulation of

communications platform-as-a-service (“CPaaS”) companies like us is continuing to evolve internationally
and many existing regulations may not fully contemplate the CPaaS business model or how they fit into the
communications regulatory framework. As a result, interpretation and enforcement of regulations often
involve significant uncertainties. In many countries, including those in the European Union, a number of
our products or services are subject to licensing and communications regulatory requirements which
increases the level of scrutiny and enforcement by regulators. Future legislative, regulatory or judicial
actions impacting CPaaS services could also increase the cost and complexity of compliance and expose us
to liability. For example, in some countries, some or all of the services we offer are not considered
regulated telecommunications services, while in other countries they are subject to telecommunications
regulations, including but not limited to payment into universal service funds, licensing fees, provision of
emergency services, provision of information to support emergency services and number portability.
Specifically, the Australian Communications and Media Authority in 2019 issued a formal finding against
several companies, including our Company, for failure to upload data into a centralized database for
emergency services and, in the future, regulatory authorities in other jurisdictions in which we operate may
also determine that we are a telecommunications company subject to similar regulations. Failure to comply
with these regulations could result in our Company being issued remedial directions to undertake
independent audits and implement effective systems, processes and practices to ensure compliance,
significant fines or being prohibited from providing telecommunications services in a jurisdiction.

Moreover, certain of our products may be used by customers located in countries where voice and

other forms of IP communications may be illegal or require special licensing or in countries on a U.S.
embargo list. Even where our products are reportedly illegal or become illegal or where users are located
in an embargoed country, users in those countries may be able to continue to use our products in those
countries notwithstanding the illegality or embargo. We may be subject to penalties or governmental
action if consumers continue to use our products in countries where it is illegal to do so or if we use a local
partner to provide services in a country and the local partner does not comply with applicable
governmental regulations. Any such penalties or governmental action may be costly and may harm our
business and damage our brand and reputation. We may be required to incur additional expenses to meet
applicable international regulatory requirements or be required to raise the prices of services, or
restructure or discontinue those services if required by law or if we cannot or will not meet those
requirements. Any of the foregoing could adversely affect our business, results of operations and financial
condition.

If we are unable to obtain or retain geographical, mobile, regional, local or toll-free numbers, or to effectively
process requests to port such numbers in a timely manner due to industry regulations, our business and results of
operations may be adversely affected.

Our future success depends in part on our ability to obtain allocations of geographical, mobile,
regional, local and toll-free direct inward dialing numbers or phone numbers as well as short codes and
alphanumeric sender IDs (collectively “Numbering Resources”) in the United States and foreign countries
at a reasonable cost and without overly burdensome restrictions. Our ability to obtain allocations of, assign
and retain Numbering Resources depends on factors outside of our control, such as applicable regulations,
the practices of authorities that administer national numbering plans or of network service providers from
whom we can provision Numbering Resources, such as offering these Numbering Resources with
conditional minimum volume call level requirements, the cost of these Numbering Resources and the level
of overall competitive demand for new Numbering Resources.

In addition, in order to obtain allocations of, assign and retain Numbering Resources in the EU or

certain other regions, we are often required to be licensed by local telecommunications regulatory
authorities, some of which have been increasingly monitoring and regulating the categories of Numbering
Resources that are eligible for provisioning to our customers. We have obtained licenses, and are in the
process of obtaining licenses in various countries in which we do business, but in some countries, the

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regulatory regime around provisioning of Numbering Resources is unclear, subject to change over time,
and sometimes may conflict from jurisdiction to jurisdiction. Furthermore, these regulations and
governments’ approach to their enforcement, as well as our products and services, are still evolving and we
may be unable to maintain compliance with applicable regulations, or enforce compliance by our
customers, on a timely basis or without significant cost. Also, compliance with these types of regulation
may require changes in products or business practices that result in reduced revenue. Due to our or our
customers’ assignment and/or use of Numbering Resources in certain countries in a manner that violates
applicable rules and regulations, we have been subjected to government inquiries and audits, and may in
the future be subject to significant penalties or further governmental action, and in extreme cases, may be
precluded from doing business in that particular country. We have also been forced to reclaim Numbering
Resources from our customers as a result of certain events of non-compliance. These reclamations result
in loss of customers, loss of revenue, reputational harm, erosion of customer trust, and may also result in
breach of contract claims, all of which could have an adverse effect on our business, results of operations
and financial condition.

Due to their limited availability, there are certain popular area code prefixes that we generally cannot

obtain. Our inability to acquire or retain Numbering Resources for our operations may make our voice
and messaging products less attractive to potential customers in the affected local geographic areas. In
addition, future growth in our customer base, together with growth in the customer bases of other
providers of cloud communications, has increased, which increases our dependence on needing sufficiently
large quantities of Numbering Resources. It may become increasingly difficult to source larger quantities
of Numbering Resources as we scale and we may need to pay higher costs for Numbering Resources, and
Numbering Resources may become subject to more stringent regulation or conditions of usage such as the
registration and on-going compliance requirements discussed above.

Additionally, in some geographies, we support number portability, which allows our customers to

transfer their existing phone numbers to us and thereby retain their existing phone numbers when
subscribing to our voice and messaging products. Transferring existing numbers is a manual process that
can take up to 15 business days or longer to complete. Any delay that we experience in transferring these
numbers typically results from the fact that we depend on network service providers to transfer these
numbers, a process that we do not control, and these network service providers may refuse or substantially
delay the transfer of these numbers to us. Number portability is considered an important feature by many
potential customers, and if we fail to reduce any related delays, then we may experience increased difficulty
in acquiring new customers.

Any of the foregoing factors could adversely affect our business, results of operations and financial

condition.

If we fail to adapt and respond effectively to rapidly changing technology, evolving industry standards, changing
regulations, and changing customer needs, requirements or preferences, our products may become less
competitive.

The market for communications in general, and cloud communications in particular, is subject to

rapid technological change, evolving industry standards, changing regulations, as well as changing
customer needs, requirements and preferences. The success of our business will depend, in part, on our
ability to adapt and respond effectively to these changes on a timely basis. If we are unable to develop new
products that satisfy our customers and provide enhancements and new features for our existing products
that keep pace with rapid technological and industry change, including but not limited to SHAKEN/STIR
and applicable industry standards, our business, results of operations and financial condition could be
adversely affected. If new technologies emerge that are able to deliver competitive products and services at
lower prices, more efficiently, more conveniently or more securely, such technologies could adversely
impact our ability to compete effectively.

Our platform must integrate with a variety of network, hardware, mobile and software platforms and

technologies, and we need to continuously modify and enhance our products and platform to adapt to
changes and innovation in these technologies. For example, Apple, Google and other cell-phone operating
system providers or inbox service providers have developed and, may in the future develop, new
applications or functions intended to filter spam and unwanted phone calls, messages or emails. Third
party platforms may also implement changes to their privacy policies or practices that may impact us or our
customers. In addition, our network service providers may adopt new filtering technologies in an effort to
combat spam or robocalling. Such technologies may inadvertently filter desired messages or calls to or
from our customers. If cell-phone operating system providers, network service providers, our customers or
their end users adopt new software platforms or infrastructure, we may be required to develop new
versions of our products to work with those new platforms or infrastructure. This development effort may
require significant resources, which would adversely affect our business, results of operations and financial
condition. Any failure of our products and platform to operate effectively with evolving or new platforms
and technologies could reduce the demand for our products. If we are unable to respond to these changes
in a cost-effective manner, our products may become less marketable and less competitive or obsolete, and
our business, results of operations and financial condition could be adversely affected.

We substantially rely upon Amazon Web Services to operate our platform, and any disruption of or interference
with our use of Amazon Web Services would adversely affect our business, results of operations and financial
condition.

We outsource a substantial majority of our cloud infrastructure to Amazon Web Services (“AWS”),

which hosts our products and platform. Our customers need to be able to access our platform at any time,
without interruption or degradation of performance. AWS runs its own platform that we access, and we
are, therefore, vulnerable to service interruptions at AWS. We have experienced, and expect that in the
future we may experience interruptions, delays and outages in service and availability due to a variety of
factors, including infrastructure changes, human or software errors, website hosting disruptions and
capacity constraints. Capacity constraints could be due to a number of potential causes, including technical
failures, natural disasters, pandemics such as COVID-19, fraud or security attacks. In addition, if our
security, or that of AWS, is compromised, or our products or platform are unavailable or our users are
unable to use our products within a reasonable amount of time or at all, then our business, results of
operations and financial condition could be adversely affected. In some instances, we may not be able to
identify the cause or causes of these performance problems within a period of time acceptable to our
customers. It may become increasingly difficult to maintain and improve our platform performance,
especially during peak usage times, as our products become more complex and the usage of our products
increases. To the extent that we do not effectively address capacity constraints, either through AWS or
alternative providers of cloud infrastructure, our business, results of operations and financial condition
may be adversely affected. In addition, any changes in service levels from AWS may adversely affect our
ability to meet our customers’ requirements, result in negative publicity which could harm our reputation
and brand and may adversely affect the usage of our platform.

The substantial majority of the services we use from AWS are for cloud-based server capacity and, to

a lesser extent, storage and other optimization offerings. AWS enables us to order and reserve server
capacity in varying amounts and sizes distributed across multiple regions. We access AWS infrastructure
through standard IP connectivity. AWS provides us with computing and storage capacity pursuant to an
agreement that continues until terminated by either party. AWS may terminate the agreement for cause
upon notice and upon our failure to cure a breach within 30 days from the date of such notification and
may, in some cases, suspend the agreement immediately for cause upon notice. Although we expect that
we could receive similar services from other third parties, if any of our arrangements with AWS are
terminated, we could experience interruptions on our platform and in our ability to make our products
available to customers, as well as delays and additional expenses in arranging alternative cloud
infrastructure services.

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Any of the above circumstances or events may harm our reputation, erode customer trust, cause
customers to stop using our products, impair our ability to increase revenue from existing customers,
impair our ability to grow our customer base, subject us to financial penalties and liabilities under our
service level agreements and otherwise harm our business, results of operations and financial condition.

We typically provide monthly uptime service level commitments of a minimum of 99.95% under our agreements
with customers. If we fail to meet these contractual commitments, then our business, results of operations and
financial condition could be adversely affected.

Our agreements with customers typically provide for service level commitments. If we suffer extended
periods of downtime for our products or platform and we are unable to meet these commitments, then we
are contractually obligated to provide a service credit, which is typically 10% of the customer’s amounts
due for the month in question. For example, on February 26, 2021, a critical feature enablement service on
our platform became overloaded, which resulted in connection issues across multiple products in our cloud
communications platform that affected our customers for a limited number of hours. The service
disruption had a widespread impact on our customers’ ability to use several of our products. We incurred
certain costs associated with offering credits to our affected customers, but the overall impact was not
material to our business. We may also ultimately lose or see reduced utilization of our products by one or
more customers as a result of the outage. In addition, the performance and availability of AWS or other
service providers that provide our cloud infrastructures is outside of our control and, therefore, we are not
in full control of whether we meet our service level commitments. As a result, our business, results of
operations and financial condition could be adversely affected if we suffer unscheduled downtime that
exceeds the service level commitments we have made to our customers. Any extended service outages
could adversely affect our business and reputation and erode customer trust.

Breaches of our networks or systems, or those of AWS or our service providers, could degrade our ability to
conduct our business, compromise the integrity of our products, platform and data, result in significant data
losses and the theft of our intellectual property, damage our reputation, expose us to liability to third parties and
require us to incur significant additional costs to maintain the security of our networks and data.

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 with our customers and business partners. We may be subject to a variety of evolving
threats, including but not limited to social-engineering attacks (including through phishing attacks),
malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat
intrusions), denial-of-service attacks (such as credential stuffing), personnel misconduct or error,
ransomware attacks, supply-chain attacks, software bugs, server malfunctions, software or hardware
failures, loss of data or other information technology assets, adware, telecommunications failures,
earthquakes, fires, floods and other similar threats. Individuals or entities may attempt to penetrate our
network security, or that of our platform, and to cause harm to our business operations, including by
misappropriating our proprietary information or that of our customers, employees and business partners
or to cause interruptions of our products and platform. In particular, cyberattacks and other malicious
internet-based activity continue to increase in frequency and in magnitude generally, and cloud-based
companies have been targeted in the past. In addition to threats from traditional computer hackers,
malicious code, software vulnerabilities, supply chain attacks and vulnerabilities through our third-party
partners, employees theft or misuse, password spraying, phishing, credential stuffing and denial-of-service
attacks, we also face threats from sophisticated organized crime, nation-state, and nation-state supported
actors who engage in attacks (including advanced persistent threat intrusions) that add to the risk to our
systems (including those hosted on AWS or other cloud services), internal networks, our customers’
systems and the information that they store and process. Ransomware and cyber extortion attacks,
including those perpetrated by organized criminal threat actors, nation-states, and nation-state-supported
actors, are becoming increasingly prevalent and severe and can lead to significant interruptions in our

operations, loss of data and income, reputational harm, and diversion of funds. Extortion payments may
alleviate or reduce the negative impact of a ransomware attack, but we may be unwilling or unable to make
such payments due to, for example, applicable laws or regulations prohibiting such payments. The
COVID-19 pandemic and our remote workforce also pose increased risks to our IT systems and data.
While we devote significant financial and employee resources to implement and maintain security
measures, because the techniques used by such individuals or entities to access, disrupt or sabotage
devices, systems and networks change frequently and may not be recognized until launched against a
target, we may be required to make further investments over time to protect data and infrastructure as
cybersecurity threats develop, evolve and grow more complex over time. We may also be unable to
anticipate these techniques, and we may not become aware in a timely manner of such a security breach,
which could exacerbate any damage we experience. Additionally, 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 network systems to security
breaches or the loss of data. We have been and expect to be subject to cybersecurity threats and incidents,
including denial-of-service attacks, employee errors or individual attempts to gain unauthorized access to
information systems. Any data security incidents, including internal malfeasance or inadvertent disclosures
by our employees or a third party’s fraudulent inducement of our employees to disclose information,
unauthorized access or usage, virus or similar breach or disruption of us or our service providers, such as
AWS, could result in loss of confidential information, damage to our reputation, erosion of customer trust,
loss of customers, litigation, regulatory investigations, fines, penalties and other liabilities. For example, in
2020, SolarWinds Inc., one of our third party software service providers, was subject to a data security
incident. We have completed our investigations of this incident and concluded that there was no adverse
impact to us.

Furthermore, we are required to comply with laws and regulations that require us to maintain the

security of personal information and we may have contractual and other legal obligations to notify
customers or other relevant stakeholders of security breaches. Such disclosures are costly, and the
disclosures or the failure to comply with such requirements could lead to adverse consequences. If we (or a
third party upon whom we rely) experience a security incident or are perceived to have experienced a
security incident, we may experience adverse consequences. These consequences may include: government
enforcement actions (for example, investigations, fines, penalties, audits, and inspections); additional
reporting requirements and/or oversight; restrictions on processing data (including personal data);
litigation (including class claims); indemnification obligations; negative publicity; reputational harm;
monetary fund diversions; interruptions in our operations (including availability of data); financial loss and
other similar harms. Security incidents and attendant consequences could lead to negative publicity, may
cause our customers to lose confidence in the effectiveness of our security measures and require us to
expend significant capital and other resources to respond to and/or mitigate the security breach.
Accordingly, if our cybersecurity measures or those of AWS or our service providers, fail to protect against
unauthorized access, attacks (which may include sophisticated cyberattacks), compromise or the
mishandling of data by our employees and contractors, then our reputation, customer trust, business,
results of operations and financial condition could be adversely affected.

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 acceptable terms or will be 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.

Defects or errors in our products could diminish demand for our products, harm our business and results of
operations and subject us to liability.

Our customers use our products for important aspects of their businesses, and any errors, defects or

disruptions to our products and any other performance problems with our products could damage our

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customers’ businesses and, in turn, hurt our brand and reputation and erode customer trust. We provide
regular updates to our products, which have in the past contained, and may in the future contain,
undetected errors, failures, vulnerabilities and bugs when first introduced or released. Real or perceived
errors, failures or bugs in our products could result in negative publicity, loss of or delay in market
acceptance of our platform, loss of competitive position, lower customer retention or claims by customers
for losses sustained by them. In such an event, we may be required, or may choose, for customer relations
or other reasons, to expend additional resources to help correct the problem. In addition, we may not carry
insurance sufficient to compensate us for any losses that may result from claims arising from defects or
disruptions in our products. As a result, our reputation and our brand could be harmed, and our business,
results of operations and financial condition may be adversely affected.

We currently generate significant revenue from our largest customers, and the loss or decline in revenue from any
of these customers could harm our business, results of operations and financial condition.

In the years ended December 31, 2021, 2020 and 2019, our 10 largest Active Customer Accounts

generated an aggregate of 11%, 14% and 13% of our revenue, respectively. In the event that any of our
large customers do not continue to use our products, use fewer of our products, or use our products in a
more limited capacity, or not at all, our business, results of operations and financial condition could be
adversely affected. Additionally, the usage of our products by customers that do not have long-term
contracts with us may change between periods. Those with no long-term contract with us may reduce or
fully terminate their usage of our products at any time without notice, penalty or termination charges,
which may adversely impact our results of operations.

If we are unable to develop and maintain successful relationships with consulting partners, our business, results of
operations and financial condition could be adversely affected.

We believe that continued growth of our business depends in part upon identifying, developing and
maintaining strategic relationships with consulting partners. As part of our growth strategy, we intend to
further develop partnerships and specific solution areas with consulting partners. If we fail to establish
these relationships in a timely and cost-effective manner, or at all, then our business, results of operations
and financial condition could be adversely affected. Additionally, even if we are successful at developing
these relationships but there are problems or issues with the integrations or enterprises are not willing to
purchase through consulting partners, our reputation and ability to grow our business may be adversely
affected.

Any failure to offer high quality customer support may adversely affect our relationships with our customers and
prospective customers, and adversely affect our business, results of operations and financial condition.

Many of our customers depend on our customer support team to assist them in deploying our
products effectively to help them to resolve post-deployment issues quickly and to provide ongoing
support. If we do not devote sufficient resources or are otherwise unsuccessful in assisting our customers
effectively, it could adversely affect our ability to retain existing customers and could prevent prospective
customers from adopting our products. We may be unable to respond quickly enough to accommodate
short-term increases in demand for customer support. We also may be unable to modify the nature, scope
and delivery of our customer support to compete with changes in the support services provided by our
competitors. Increased demand for customer support, without corresponding revenue, could increase costs
and adversely affect our business, results of operations and financial condition. Our sales are highly
dependent on our business reputation and on positive recommendations from developers. Any failure to
maintain high quality customer support, or a market perception that we do not maintain high quality
customer support, could erode customer trust and adversely affect our reputation, business, results of
operations and financial condition.

Failure to set optimal prices for our products could adversely impact our business, results of operations and
financial condition.

For certain of our products, we primarily charge our customers based on their use of such products
(“usage-based pricing”). One of the challenges to our usage-based pricing is that the fees that we pay to
network service providers over whose networks we transmit communications can vary daily or weekly and
are affected by volume and other factors that may be outside of our control and difficult to predict. This
can result in us incurring increased costs that we may be unable or unwilling to pass through to our
customers, which could adversely impact our business, results of operations and financial condition.

We expect that we may need to change our pricing from time to time. In the past, we have sometimes

reduced our prices either for individual customers in connection with long-term agreements or for a
particular product. Further, as competitors introduce new products or services that compete with ours or
reduce their prices, we may be unable to attract new customers or retain existing customers based on our
historical pricing. As we expand internationally, we also must determine the appropriate price to enable us
to compete effectively internationally. Moreover, enterprises, which are a primary focus for our direct sales
efforts, may demand substantial price concessions. In addition, if the mix of products sold changes,
including for a shift to IP-based products, then we may need to, or choose to, revise our pricing. As a
result, in the future we may be required or choose to reduce our prices or change our pricing model, which
could adversely affect our business, results of operations and financial condition.

We have been sued and may, in the future, be sued by third parties for alleged infringement of their proprietary
rights, which could adversely affect our business, results of operations and financial condition.

There is considerable patent and other intellectual property development activity in our industry. We
may also introduce or acquire new products or technologies, including in areas where we historically have
not participated, which could increase our exposure to third party intellectual property claims. Our future
success depends, in part, on not infringing the intellectual property rights of others and we may be unaware
of the intellectual property rights of others that may cover some or all of our technology. Our competitors
or other third parties have claimed and may, in the future, claim that our products or platform and
underlying technology are infringing upon their intellectual property rights, and we may be found to be
infringing upon such rights. For example, Telesign Corporation (“Telesign”) sued us in 2015 and 2016
alleging that we infringed four U.S. patents. The patent infringement allegations in the lawsuits related to
our two-factor authentication use case, Authy, and an API tool to find information about a phone number.
On October 19, 2018, a United States District Court in the Northern District of California entered
judgment in our favor on all asserted claims, which was affirmed on appeal. We intend to vigorously
defend ourselves against such lawsuits. During the course of these lawsuits, there may be announcements
of the results of hearings and motions and other interim developments related to the litigation. If securities
analysts or investors regard these announcements as negative, the trading price of our Class A common
stock may decline.

Any claims or litigation could cause us to incur significant expenses and, if successfully asserted
against us, could require that we pay substantial damages or ongoing royalty payments, prevent us from
offering our products, or require that we comply with other unfavorable terms. We may also be obligated
to indemnify our customers or business partners in connection with any such litigation and to obtain
licenses or modify our products or platform, which could further exhaust our resources. Litigation is
inherently uncertain and even if we were to prevail in the event of claims or litigation against us, any claim
or litigation regarding intellectual property could be costly and time-consuming and divert the attention of
our management and other employees from our business. Patent infringement, trademark infringement,
trade secret misappropriation and other intellectual property claims and proceedings brought against us,
whether successful or not, could harm our brand, business, results of operations and financial condition.

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Indemnity provisions in various agreements potentially expose us to substantial liability for data breach,
intellectual property infringement and other losses.

Our agreements with customers and other third parties typically include indemnification or other
provisions under which we agree to indemnify or otherwise be liable to them for losses suffered or incurred
as a result of claims of intellectual property infringement, loss or exposure of confidential or sensitive data,
damages caused by us to property or persons or other liabilities relating to or arising from our products or
platform or other acts or omissions. The term of these contractual provisions often survives termination or
expiration of the applicable agreement. Large indemnity payments or damage claims from contractual
breach could harm our business, results of operations and financial condition. Although typically we
contractually limit our liability with respect to such obligations, we may still incur substantial liability
related to them. Any dispute with a customer with respect to such obligations could have adverse effects on
our relationship with that customer and other current and prospective customers, demand for our products
and adversely affect our business, results of operations and financial condition.

We could incur substantial costs in protecting or defending our intellectual property rights, and any failure to
protect our intellectual property could adversely affect our business, results of operations and financial condition.

Our success depends, in part, on our ability to protect our brand and the proprietary methods and
technologies that we develop under patent and other intellectual property laws in the U.S. and in non-U.S.
jurisdictions so that we can prevent others from using our inventions and proprietary information. As of
December 31, 2021, in the United States, we had been issued 197 patents, which expire between 2029 and
2040. As of such date, we also had 36 issued patents in non-U.S. jurisdictions, all of which are related to
U.S. patents and patent applications. We have also filed various applications for protection of certain
aspects of our intellectual property in the United States and internationally. There can be no assurance
that additional patents will be issued or that any patents that have been issued or that may be issued in the
future will provide significant protection for our intellectual property. As of December 31, 2021, we had 50
registered trademarks in the United States and 416 registered trademarks in non-U.S. jurisdictions. If we
fail to protect our intellectual property rights adequately, our competitors might gain access to our
technology and our business, results of operations and financial condition may be adversely affected.

There can be no assurance that the particular forms of intellectual property protection that we seek,

including business decisions about when to file patent applications and trademark applications, will be
adequate to protect our business. We could be required to spend significant resources to monitor and
protect our intellectual property rights. Litigation has in the past, and may be necessary in the future, to
enforce our intellectual property rights, determine the validity and scope of our proprietary rights or those
of others, or defend against claims of infringement or invalidity. Such litigation could be costly, time-
consuming and distracting to management, result in a diversion of significant resources, the narrowing or
invalidation of portions of our intellectual property and have an adverse effect on our business, results of
operations and financial condition. Our efforts to enforce our intellectual property rights may be met with
defenses, counterclaims and countersuits attacking the validity and enforceability of our intellectual
property rights or alleging that we infringe the counterclaimant’s own intellectual property. Any of our
patents, copyrights, trademarks or other intellectual property rights could be challenged by others or
invalidated through administrative process or litigation.

We also rely, in part, on confidentiality agreements with our business partners, employees,

consultants, advisors, customers and others in our efforts to protect our proprietary technology, processes
and methods. These agreements may not effectively prevent disclosure of our confidential information,
and it may be possible for unauthorized parties to copy our software or other proprietary technology or
information, or to develop similar software independently without our having an adequate remedy for
unauthorized use or disclosure of our confidential information. In addition, others may independently
discover our trade secrets and proprietary information, and in these cases, we would not be able to assert
any trade secret rights against those parties. Costly and time-consuming litigation could be necessary to

enforce and determine the scope of our proprietary rights, and failure to obtain or maintain trade secret
protection could adversely affect our competitive business position.

In addition, the laws of some countries do not protect intellectual property and other proprietary

rights to the same extent as the laws of the United States. To the extent we expand our international
activities, whether through acquisitions, international product development, regulatory compliance of local
data sovereignty, or improving our services (e.g. reducing latency or ensuring redundancy) our exposure to
unauthorized copying, transfer and use of our proprietary technology or information may increase.

We cannot be certain that our means of protecting our intellectual property and proprietary rights will

be adequate or that our competitors will not independently develop similar technology. If we fail to
meaningfully protect our intellectual property and proprietary rights, our business, results of operations
and financial condition could be adversely affected.

We may acquire or invest in companies, which may divert our management’s attention and result in debt or
dilution to our stockholders. We may be unable to integrate acquired businesses and technologies successfully or
achieve the expected benefits of such acquisitions or investments.

We actively evaluate and consider potential strategic transactions, including acquisitions of, or
investments in, businesses, technologies, services, products and other assets in the future. For example, in
November 2020, we acquired Segment for a total purchase price of $3.0 billion, of which approximately
$2.5 billion represented the value of our Class A common stock issued at closing. The estimated
transaction value of $3.2 billion, as previously announced, included certain shares of Class A common
stock and assumed equity awards that are subject to future vesting. Accordingly, at closing, our
stockholders incurred substantial dilution. Any future acquisitions or strategic transactions may result in
additional dilution or require us to take on debt in order to finance any such transactions. For further risks
related to our acquisitions, please see below under “Risks Related to our Acquisitions.” We also may enter
into relationships with other businesses to expand our products and platform, which could involve
preferred or exclusive licenses, additional channels of distribution, discount pricing or investments in other
companies, such as our recent proposed minority investment of $500.0 million to $750.0 million in
Syniverse Corporation.

Any acquisition, investment or business relationship may result in unforeseen operating difficulties
and expenditures. In particular, we may encounter difficulties or delays in assimilating or integrating the
businesses, technologies, products, employees or operations of the acquired companies, particularly if the
key employees of the acquired company choose not to work for us, their products or services are not easily
adapted to work with our platform, or we have difficulty retaining the customers of any acquired business
due to changes in ownership, management or otherwise. In addition, we may discover liabilities or
deficiencies associated with the assets or companies we acquire or ineffective or inadequate controls,
procedures or policies at an acquired business that were not identified in advance, any of which could
result in significant unanticipated costs. Acquisitions also may disrupt our business, divert our resources or
require significant management attention that would otherwise be available for development of our
existing business. Moreover, the anticipated benefits of any acquisition, investment or business relationship
may not be realized or we may be exposed to unknown risks or liabilities.

Negotiating these transactions can be time consuming, difficult and expensive, and our ability to
complete these transactions may often be subject to approvals that are beyond our control. Consequently,
these transactions, even if announced, may not be completed. For one or more of those transactions, we
may:

• issue additional equity securities that would dilute our existing stockholders;

• use cash that we may need in the future to operate our business;

• incur large charges or substantial liabilities;

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• incur debt on terms unfavorable to us or that we are unable to repay;

• encounter difficulties retaining key employees of the acquired company or integrating diverse

software codes or business cultures;

• invest in securities that are illiquid or decline in value;

• encounter difficulties retaining the acquired company’s customers; or

• become subject to adverse tax consequences, substantial depreciation, or deferred compensation

charges.

The occurrence of any of these foregoing could adversely affect our business, results of operations and

financial condition.

We depend largely on the continued services of our senior management and other key employees, the loss or
incapacitation of any of whom could adversely affect our business, results of operations and financial condition.

Our future performance depends on the continued services and contributions of our senior
management and other key employees to execute on our business plan, to develop our products and
platform, to deliver our products to customers, to attract and retain customers and to identify and pursue
opportunities. The loss of services of senior management or other key employees could significantly delay
or prevent the achievement of our development and strategic objectives. In particular, we depend to a
considerable degree on the vision, skills, experience and effort of our co-founder and Chief Executive
Officer, Jeff Lawson. None of our executive officers or other senior management are bound by a written
employment agreement and any of them may terminate employment with us at any time with no advance
notice. The replacement of any of our senior management would likely involve significant time and costs,
and such loss could significantly delay or prevent the achievement of our business objectives. The loss of
the services of any of our senior management or other key employees for any reason could adversely affect
our business, results of operations and financial condition.

If we are unable to hire, retain and motivate qualified employees, our business will suffer.

Our future success depends, in part, on our ability to continue to attract and retain highly skilled

employees. We believe that there is, and will continue to be, intense competition for highly skilled
management, technical, sales and other employees with experience in our industry. In addition, we have
experienced and may continue to experience employee turnover as a result of the ongoing “great
resignation” occurring throughout the U.S. economy. New employees require training, take time before
they achieve full productivity, and may not become as productive as we expect, and we may be unable to
hire or retain sufficient numbers of qualified individuals. In addition, our new Open Work hybrid approach
to work, announced in February 2021, may not meet the expectations of our workforce. Further, labor is
subject to external factors that are beyond our control, including our industry’s highly competitive market
for skilled workers and leaders, cost inflation, the COVID-19 pandemic and workforce participation rates.
We must provide competitive compensation packages and a high quality work environment to hire, retain
and motivate employees. If we are unable to retain and motivate our existing employees and attract
qualified employees to fill key positions, we may be unable to manage our business effectively, including
the development, marketing and sale of our products, which could adversely affect our business, results of
operations and financial condition. To the extent we hire employees from competitors, we also may be
subject to allegations that they have been improperly solicited or divulged proprietary or other confidential
information. Volatility in, or lack of performance of, our stock price may also affect our ability to attract
and retain key employees. If we are unable to retain our employees, our business, results of operations and
financial condition could be adversely affected.

United States federal legislation and international laws impose certain obligations on the senders of commercial
emails, which could minimize the effectiveness of our platform, and establish financial penalties for
non-compliance, which could increase the costs of our business.

The Federal Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003, or the
CAN-SPAM Act, establishes certain requirements for commercial email messages and transactional email
messages and specifies penalties for the transmission of email messages that are intended to deceive the
recipient as to source or content. Among other things, the CAN-SPAM Act, obligates the sender of
commercial emails to provide recipients with the ability to “opt-out” of receiving future commercial emails
from the sender. In addition, some states have passed laws regulating commercial email practices that are
significantly more restrictive and difficult to comply with than the CAN-SPAM Act. For example, Utah
and Michigan prohibit the sending of email messages that advertise products or services that minors are
prohibited by law from purchasing or that contain content harmful to minors to email addresses listed on
specified child protection registries. Some portions of these state laws may not be preempted by the
CAN-SPAM Act. In addition, certain non-U.S. jurisdictions in which we operate have enacted laws
regulating the sending of email that are more restrictive than U.S. laws. For example, some foreign laws
prohibit sending broad categories of email unless the recipient has provided the sender advance consent
(or “opted-in”) to receipt of such email. If we were found to be in violation of the CAN-SPAM Act,
applicable state laws governing email not preempted by the CAN-SPAM Act or foreign laws regulating the
distribution of email, whether as a result of violations by our customers or our own acts or omissions, we
could be required to pay large penalties, which would adversely affect our financial condition, significantly
harm our business, injure our reputation and erode customer trust. The terms of any injunctions,
judgments, consent decrees or settlement agreements entered into in connection with enforcement actions
or investigations against our company in connection with any of the foregoing laws may also require us to
change one or more aspects of the way we operate our business, which could impair our ability to attract
and retain customers or could increase our operating costs.

Our customers’ and other users’ violation of our policies or other misuse of our platform to transmit
unauthorized, offensive or illegal messages, spam, phishing scams, and website links to harmful applications or
for other fraudulent or illegal activity could damage our reputation, and we may face a risk of litigation and
liability for illegal activities on our platform and unauthorized, inaccurate, or fraudulent information distributed
via our platform.

The actual or perceived improper sending of text messages or voice calls may subject us to potential

risks, including liabilities or claims relating to consumer protection laws and regulatory enforcement,
including fines. For example, the Telephone Consumer Protection Act of 1991 (“TCPA”) restricts
telemarketing and the use of automatic SMS text messages without explicit customer consent. TCPA
violations can result in significant financial penalties, as businesses can incur penalties or criminal fines
imposed by the FCC or be fined up to $1,500 per violation through private litigation or state attorneys
general or other state actor enforcement. Class action suits are the most common method for private
enforcement. This has resulted in civil claims against our company and requests for information through
third-party subpoenas. The scope and interpretation of the laws that are or may be applicable to the
delivery of text messages or voice calls are continuously evolving and developing. If we do not comply with
these laws or regulations or if we become liable under these laws or regulations due to the failure of our
customers to comply with these laws by obtaining proper consent, we could face direct liability.

Moreover, despite our ongoing and substantial efforts to limit such use, certain customers may use our

platform to transmit unauthorized, offensive or illegal messages, calls, spam, phishing scams, and website
links to harmful applications, reproduce and distribute copyrighted material or the trademarks of others
without permission, and report inaccurate or fraudulent data or information. These issues also arise with
respect to a portion of those users who use our platform on a free trial basis or upon initial use. These
actions are in violation of our policies, in particular, our Acceptable Use Policy. However, our efforts to

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defeat spamming attacks, illegal robocalls and other fraudulent activity will not prevent all such attacks and
activity. Such use of our platform could damage our reputation and we could face claims for damages,
regulatory enforcement, copyright or trademark infringement, defamation, negligence, or fraud.
Furthermore, enacting more stringent controls on our customers’ use of our platform to combat such
violations of our Acceptable Use Policy could increase friction for our legitimate customers and decrease
their use of our platform.

Moreover, 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 Shortcode Agreement and associated policies. We rely on contractual
representations made to us by our customers that their use of our platform will comply with our policies
and applicable law, including, without limitation, our email and messaging policies. Although we retain the
right to verify that customers and other users are abiding by certain contractual terms, our Acceptable Use
Policy and our email and messaging policies and, in certain circumstances, to review their email, messages
and distribution lists, our customers and other users are ultimately responsible for compliance with our
policies, and we do not systematically audit our customers or other users to confirm compliance with our
policies. We cannot predict whether our role in facilitating our customers’ or other users’ activities would
expose us to liability under applicable state or federal law, or whether that possibility could become more
likely if changes to current laws regulating content moderation, such as Section 230 of the
Communications Decency Act are enacted. There are various Congressional, FCC and executive efforts to
eliminate or restrict the scope of the protections under Section 230, which limits the liability of internet
platforms for third-party content that is transmitted via those platforms and for good-faith moderation of
offensive content. In addition, Florida and Texas adopted statutes intended to reduce or eliminate the
protections granted under Section 230, although implementation of both statutes has been stayed by
federal courts, and similar legislation was introduced in other states in 2021. Even if claims asserted against
us do not result in liability, we may incur substantial costs in investigating and defending such claims. If we
are found liable for our customers’ or other users’ activities, we could be required to pay fines or penalties,
redesign business methods or otherwise expend resources to remedy any damages caused by such actions
and to avoid future liability.

Our use of open source software could negatively affect our ability to sell our products and subject us to possible
litigation.

Our products and platform incorporate open source software, and we expect to continue to
incorporate open source software in our products and platform in the future. Few of the licenses
applicable to open source software have been interpreted by courts, and there is a risk that these licenses
could be construed in a manner that could impose unanticipated conditions or restrictions on our ability to
commercialize our products and platform. Moreover, although we have implemented policies to regulate
the use and incorporation of open source software into our products and platform, we cannot be certain
that we have not incorporated open source software in our products or platform in a manner that is
inconsistent with such policies. If we fail to comply with open source licenses, we may be subject to certain
requirements, including requirements that we offer our products that incorporate the open source software
for no cost, that we make available source code for modifications or derivative works we create based
upon, incorporating or using the open source software and that we license such modifications or derivative
works under the terms of applicable open source licenses. If an author or other third party that distributes
such open source software were to allege that we had not complied with the conditions of one or more of
these licenses, we could be required to incur significant legal expenses defending against such allegations
and could be subject to significant damages, enjoined from generating revenue from customers using
products that contained the open source software and required to comply with onerous conditions or
restrictions on these products. In any of these events, we and our customers could be required to seek
licenses from third parties in order to continue offering our products and platform and to re-engineer our
products or platform or discontinue offering our products to customers in the event re-engineering cannot

be accomplished on a timely basis. Any of the foregoing could require us to devote additional research and
development resources to re-engineer our products or platform, could result in customer dissatisfaction
and may adversely affect our business, results of operations and financial condition.

Changes in laws and regulations related to the Internet or changes in the Internet infrastructure itself may
diminish the demand for our products, and could adversely affect our business, results of operations and financial
condition.

The future success of our business depends upon the continued use of the Internet as a primary
medium for commerce, communications and business applications. Federal, state or foreign government
bodies or agencies have in the past adopted, and may in the future adopt, laws or regulations affecting the
use of the Internet as a commercial medium. Changes in these laws or regulations could require us to
modify our products and platform in order to comply with these changes. In addition, government agencies
or private organizations have imposed and may impose additional taxes, fees or other charges for accessing
the Internet or commerce conducted via the Internet. These laws or charges could limit the growth of
Internet-related commerce or communications generally or result in reductions in the demand for
Internet-based products and services such as our products and platform. In particular, a re-adoption of
“network neutrality” rules in the United States, which President Biden supported during his campaign,
could affect the services used by us and our customers. California’s state network neutrality law went into
effect after a federal district court denied a motion for preliminary injunction on March 10, 2021, and that
decision was affirmed by the U.S. Court of Appeals for the Ninth Circuit on January 28, 2022. A number of
other states have adopted or are adopting or considering legislation or executive actions that would
regulate the conduct of broadband providers. In addition, the use of the Internet as a business tool could
be adversely affected due to delays in the development or adoption of new standards and protocols to
handle increased demands of Internet activity, security, reliability, cost, ease-of-use, accessibility and
quality of service. The performance of the Internet and its acceptance as a business tool has been adversely
affected by “viruses,” “worms,” and similar malicious programs. If the use of the Internet is reduced as a
result of these or other issues, then demand for our products could decline, which could adversely affect
our business, results of operations and financial condition.

The technology industry is subject to increasing scrutiny that could result in government actions that would
negatively affect our business.

The technology industry is subject to intense media, political and regulatory scrutiny, both domestic

and foreign, including on issues related to antitrust, privacy, and artificial intelligence, which exposes us to
government investigations, legal actions and penalties. For instance, various regulatory agencies, including
competition and consumer protection authorities, have active proceedings and investigations concerning
multiple technology companies on antitrust and other issues. If we become subject to such investigations,
we could be liable for substantial fines and penalties, be required to change our products and services or
alter our business operations, receive negative publicity, or be subject to civil litigation, all of which could
harm our business. Lawmakers also have proposed new laws and regulations, and modifications to existing
laws and regulations, that affect the activities of technology companies, such as the recent legislative efforts
to eliminate or modify Section 230 of the Communications Decency Act and to regulate platforms that
offer apps and other similar actions in some U.S. states. If such laws and regulations are enacted or
modified, they could impact us, even if they are not intended to affect our company. In addition, the
introduction of new products and services, expansion of our activities in certain jurisdictions, or other
actions that we may take may subject us to additional laws, regulations, and other scrutiny. The increased
scrutiny of certain acquisitions in the technology industry also could affect our ability to enter into strategic
transactions or to acquire other businesses.

Compliance with new or modified laws and regulations could increase the cost of conducting our
business, limit the opportunities to increase our revenues, or prevent us from offering products or services.

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While we have adopted policies and procedures designed to ensure compliance with applicable laws and
regulations, there can be no assurance that our employees, contractors or agents will not violate such laws
and regulations. If we are found to have violated laws and regulations, it could materially adversely affect
our reputation, financial condition and results of operations.

We also could be harmed by government investigations, litigation, or changes in laws and regulations
directed at our customers, business partners, or suppliers in the technology industry that have the effect of
limiting our ability to do business with those entities. There can be no assurance that our business will not
be materially adversely affected, individually or in the aggregate, by the outcomes of such investigations,
litigation or changes to laws and regulations in the future.

The standards imposed by private entities and inbox service providers to regulate the use and delivery of email
have in the past interfered with, and may continue to interfere with, the effectiveness of our platform and our
ability to conduct business.

From time to time, some of our IP addresses have become, and we expect will continue to be, listed

with one or more denylisting entities due to the messaging practices of our customers and other users. We
may be at an increased risk of having our IP addresses denylisted due to our scale and volume of email
processed, compared to our smaller competitors. There can be no guarantee that we will be able to
successfully remove ourselves from those lists. Because we fulfill email delivery on behalf of our customers,
denylisting of this type could undermine the effectiveness of our customers’ transactional email, email
marketing programs and other email communications, all of which could have a material negative impact
on our business, financial condition and results of operations.

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’s inbox. While we continually improve our own technology and work closely with inbox service
providers to maintain our deliverability rates, the implementation of new or more restrictive policies by
inbox service providers may make it more difficult to deliver our customers’ emails, particularly if we are
not given adequate notice of a change in policy or struggle to update our platform or services to comply
with the changed policy in a reasonable amount of time. If the open rates of our customers’ emails are
negatively impacted by the actions of inbox service providers to block or categorize emails then customers
may question the effectiveness of our platform and cancel their accounts. This, in turn, could harm our
business, financial condition and results of operations.

Our global operations subject us to potential liability under export control, economic trade sanctions, anti-
corruption, and other laws and regulations, and such violations could impair our ability to compete in
international markets and could subject us to liability for compliance violations.

Certain of our products and services may be subject to export control and economic sanctions laws
and regulations, including the U.S. Export Administration Regulations, U.S. Customs regulations, and
various economic and trade sanctions regulations administered by the U.S. Treasury Department’s Office
of Foreign Assets Control. Exports of our products and the provision of our services must be made in
compliance with these requirements. Although we take precautions to prevent our products from being
provided in violation of such laws, we are aware of previous exports of certain of our products to a small
number of persons and organizations that are the subject of U.S. sanctions or located in countries or
regions subject to U.S. sanctions. If we fail to comply with these laws and regulations, we and certain of our
employees could be subject to substantial civil or criminal penalties, including: the possible loss of export
privileges; fines, which may be imposed on us and responsible employees or managers; and, in extreme
cases, the incarceration of responsible employees or managers. Obtaining the necessary authorizations,
including any required license, for a particular deployment may be time-consuming, is not guaranteed and
may result in the delay or loss of sales opportunities. In addition, changes in our products or services, or
changes in applicable export or economic sanctions regulations may create delays in the introduction and

deployment of our products and services in international markets, or, in some cases, prevent the export of
our products or provision of our services to certain countries or end users. Any change in trade protection
laws, policies, export, sanctions and other regulatory requirements affecting trade and investments, shift in
the enforcement or scope of existing regulations, or change in the countries, governments, persons or
technologies targeted by such regulations, could also result in decreased use of our products and services,
or in our decreased ability to export our products or provide our services to existing or prospective
customers with international operations. Any decreased use of our products and services or limitations on
our ability to export our products and provide our services could adversely affect our business, results of
operations and financial condition.

Further, we incorporate encryption technology into certain of our products. Various countries
regulate the import of certain encryption technology, including through import permitting and licensing
requirements, and have enacted laws that could limit our customers’ ability to import our products into
those countries. Encryption products and the underlying technology may also be subject to export control
restrictions. Governmental regulation of encryption technology and regulation of exports of encryption
products, or our failure to obtain required approval for our products, when applicable, could harm our
international sales and adversely affect our revenue. Compliance with applicable regulatory requirements
regarding the export of our products and provision of our services, including with respect to new releases
of our products and services, may create delays in the introduction of our products and services in
international markets, prevent our customers with international operations from deploying our products
and using our services throughout their globally-distributed systems or, in some cases, prevent the export
of our products or provision of our services to some countries altogether.

We are also subject to U.S. and foreign anti-corruption and anti-bribery laws, including the Foreign

Corrupt Practices Act, as amended, the UK Bribery Act 2010, and other anti-corruption laws and
regulations in the countries in which we conduct activities. Anti-corruption laws are interpreted broadly
and generally prohibit corrupt payments by our employees and third parties acting on our behalf from
directly or indirectly authorizing, offering, or providing, improper payments or things of value to recipients
in the public or private sector, and also require that we maintain accurate books and records and adequate
internal controls. While we have implemented a global compliance program designed to reduce the risk of
bribery and corruption-related violations, our employees or third parties acting on our behalf may fail to
comply with our policies, resulting in violations of applicable anti-corruption laws and regulations. Such
violations could result in significant fines and penalties, criminal liability for us, our individual officers or
employees, prohibitions on our ability to conduct business, and potential reputational damage.

Our reliance on SaaS technologies from third parties may adversely affect our business, results of operations and
financial condition.

We rely on hosted SaaS technologies from third parties in order to operate critical internal functions

of our business, including enterprise resource planning, customer support and customer relations
management services. If these services become unavailable due to extended outages or interruptions, or
because they are no longer available on commercially reasonable terms or prices, our expenses could
increase. As a result, our ability to manage our operations could be interrupted and our processes for
managing our sales process and supporting our customers could be impaired until equivalent services, if
available, are identified, obtained and implemented, all of which could adversely affect our business,
results of operations and financial condition.

We may have additional tax liabilities, which could harm our business, results of operations and financial
condition.

Significant judgments and estimates are required in determining our provision for income taxes and
other tax liabilities. Our tax expense may be impacted, for example, if tax laws change or are clarified to
our detriment or if tax authorities successfully challenge the tax positions that we take, such as, for

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example, positions relating to the arms-length pricing standards for our intercompany transactions and our
indirect tax positions. In determining the adequacy of our provision for income taxes, we assess the
likelihood of adverse outcomes that could result if our tax positions were challenged by the Internal
Revenue Service (“IRS”), and other tax authorities. Should the IRS or other tax authorities assess
additional taxes as a result of examinations, we may be required to record charges to operations that could
adversely affect our results of operations and financial condition.

We conduct operations in many tax jurisdictions throughout the United States and internationally. In

many of these jurisdictions, non-income-based taxes, such as sales, VAT, GST, and telecommunications
taxes, are assessed on our operations or our sales to customers. We are subject to indirect taxes, and may
be subject to certain other taxes, in some of these jurisdictions. We collect certain telecommunications-
based taxes from our customers in certain jurisdictions, and we expect to continue expanding the number
of jurisdictions in which we will collect these taxes in the future.

Many states are also pursuing legislative expansion of the scope of goods and services that are subject
to sales and similar taxes as well as the circumstances in which a vendor of goods and services must collect
such taxes. Following the U.S. Supreme Court decision in South Dakota v. Wayfair, Inc., states are now
free to levy taxes on sales of goods and services based on an “economic nexus,” regardless of whether the
seller has a physical presence in the state. Any additional fees and taxes levied on our services by any state
may adversely impact our results of operations.

Historically, we have not billed or collected taxes in certain jurisdictions and, in accordance with

generally accepted accounting principles in the United States (“U.S. GAAP”), we have recorded a
provision for our tax exposure in these jurisdictions when it is both probable that a liability has been
incurred and the amount of the exposure can be reasonably estimated. We reserved $25.4 million and
$17.7 million for domestic jurisdictions and jurisdictions outside of the U.S., respectively, on our
December 31, 2021 balance sheet for these tax payments. These estimates include several key assumptions,
including, but not limited to, the taxability of our products, the jurisdictions in which we believe we have
nexus or a permanent establishment, and the sourcing of revenues to those jurisdictions. In the event these
jurisdictions challenge our assumptions and analysis, our actual exposure could differ materially from our
current estimates. If the actual payments we make to any jurisdiction exceed the accrual in our balance
sheet, our results of operations would be harmed. In addition, some customers may question the
incremental tax charges and seek to negotiate lower pricing from us, which could adversely affect our
business, results of operations and financial condition.

We are in discussions with certain jurisdictions regarding potential sales and other indirect taxes for
prior periods that we may owe. If any of these jurisdictions disagree with management’s assumptions and
analysis, the assessment of our tax exposure could differ materially from management’s current estimates.
For example, San Francisco City and County has assessed us for $38.8 million in taxes, including interest
and penalties, which exceeded the $11.5 million we had accrued for that assessment. We have paid the full
amount, as required by law, and the payment made in excess of the accrued amount is reflected as a
deposit on our balance sheet. We believe, however, that this assessment is incorrect and, after failing to
reach a settlement, filed a lawsuit on May 27, 2021 contesting the assessment. However, litigation is
uncertain and a ruling against us may adversely affect our financial position and results of operation.

Our global operations and structure subject us to potentially adverse tax consequences.

We generally conduct our global operations through subsidiaries and report our taxable income in
various jurisdictions worldwide based upon our business operations in those jurisdictions. In particular, our
intercompany relationships are subject to complex transfer pricing regulations administered by taxing
authorities in various jurisdictions. Also, our tax expense could be affected depending on the applicability
of withholding and other taxes (including withholding and indirect taxes on software licenses and related
intercompany transactions) under the tax laws of certain jurisdictions in which we have business

operations. The relevant revenue and taxing authorities may disagree with positions we have taken
generally, or our determinations as to the value of assets sold or acquired or income and expenses
attributable to specific jurisdictions. If such a disagreement were to occur, and our position were not
sustained, we could be required to pay additional taxes, interest and penalties, which could result in one-
time tax charges, higher effective tax rates, reduced cash flows and lower overall profitability of our
operations.

Changes in global and U.S. tax legislation may adversely affect our financial condition, results of operations, and
cash flows.

We are unable to predict what global or U.S. tax reforms may be proposed or enacted in the future or

what effects such future changes would have on our business. Any such changes in tax legislation,
regulations, policies or practices in the jurisdictions in which we operate could increase the estimated tax
liability that we have expensed to date and paid or accrued on our balance sheet; affect our financial
position, future results of operations, cash flows, and effective tax rates where we have operations; reduce
post-tax returns to our stockholders; and increase the complexity, burden, and cost of tax compliance. We
are subject to potential changes in relevant tax, accounting, and other laws, regulations, and
interpretations, including changes to tax laws applicable to corporate multinationals. For example, in the
United States, Congress and the Biden administration have recently proposed legislation (which has not
yet been enacted) to make various tax law changes, including to increase U.S. taxation of international
business operations and impose a global minimum tax. While it is too early to predict the outcome of these
proposals and they are subject to change, if enacted, they could have a material effect on our income tax
liability.

Certain government agencies in jurisdictions where we and our affiliates do business have had an
extended focus on issues related to the taxation of multinational companies. In addition, the Organisation
for Economic Co-operation and Development (the “OECD”) is conducting a project focused on base
erosion and profit shifting in international structures, which seeks to establish certain international
standards for taxing the worldwide income of multinational companies. In addition, the OECD is working
on a “BEPS 2.0” initiative, which is aimed at (i) shifting taxing rights to the jurisdiction of the consumer
and (ii) ensuring all companies pay a global minimum tax. On October 8, 2021, the OECD announced an
agreement by members of the Inclusive Framework delineating an implementation plan, and on
December 20, 2021, the OECD released model rules for the domestic implementation of a 15% global
minimum tax. Further, several countries have proposed or enacted taxes applicable to digital services,
which could apply to our business. As a result of these developments, the tax laws of certain countries in
which we and our affiliates do business could change on a prospective or retroactive basis, and any such
changes could increase our liabilities for taxes, interest and penalties, and therefore could harm our
business, cash flows, results of operations and financial position.

The governments of countries in which we operate and other governmental bodies could make
unprecedented assertions about how taxation is determined in their jurisdictions that are contrary to the
way in which we have interpreted and historically applied the rules and regulations in our tax returns filed
in such jurisdictions. New laws could significantly increase our tax obligations in the countries in which we
do business or require us to change the way we operate our business. As a result of the large and
expanding scale of our international business activities, many of these changes to the taxation of our
activities could increase our worldwide effective tax rate and harm our financial position, results of
operations, and cash flows.

If we experience fraudulent activity relating to our products, we could incur substantial costs.

Our products may be subject to fraudulent usage, including but not limited to revenue share fraud,

domestic traffic pumping, subscription fraud, premium text message scams and other fraudulent schemes.
Although our customers are required to set passwords or personal identification numbers to protect their

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accounts, third parties have in the past been, and may in the future be, able to access and use their
accounts through fraudulent means. Furthermore, spammers attempt to use our products to send targeted
and untargeted spam messages. We cannot be certain that our efforts to defeat spamming attacks will be
successful in eliminating all spam messages from being sent using our platform. In addition, a cybersecurity
breach of our customers’ systems could result in exposure of their authentication credentials, unauthorized
access to their accounts or fraudulent calls on their accounts, any of which could adversely affect our
business, results of operations and financial condition.

We may require additional capital to support our business, and this capital might not be available on acceptable
terms, if at all.

We intend to continue to make investments to support our business and may require additional funds.

In particular, we may seek additional funds to develop new products and enhance our platform and
existing products, expand our operations, including our sales and marketing organizations and our
presence outside of the United States, improve our infrastructure or acquire complementary businesses,
technologies, services, products and other assets. In addition, we may use a portion of our cash to satisfy
tax withholding and remittance obligations related to outstanding restricted stock units. Accordingly, we
may need to engage in equity or debt financings to secure additional funds. If we raise additional funds
through future issuances of equity or convertible debt securities, our stockholders could suffer significant
dilution, and any new equity securities we issue could have rights, preferences and privileges superior to
those of holders of our Class A and Class B common stock. Any debt financing that we may secure in the
future could involve restrictive covenants relating to our capital raising activities and other financial and
operational matters, which may make it more difficult for us to obtain additional capital and to pursue
business opportunities. We may not be able to obtain additional financing on terms favorable to us, if at
all. If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require
it, our ability to continue to support our business growth, scale our infrastructure, develop product
enhancements and to respond to business challenges could be significantly impaired, and our business,
results of operations and financial condition may be adversely affected.

We face exposure to foreign currency exchange rate fluctuations, and such fluctuations could adversely affect our
business, results of operations and financial condition.

As our international operations expand, our exposure to the effects of fluctuations in currency

exchange rates grows. For example, global political and economic events, such as the COVID-19
pandemic, trade tariff developments and other geopolitical events have caused global economic
uncertainty and variability in foreign currency exchange rates. While we have primarily transacted with
customers and business partners in U.S. dollars, we have also conducted business in currencies other than
the U.S. dollar. We expect to significantly expand the number of transactions with customers that are
denominated in foreign currencies in the future as we continue to expand our business internationally. We
also incur expenses for some of our network service provider costs outside of the United States in local
currencies and for employee compensation and other operating expenses at our non-U.S. locations in the
respective local currency. Fluctuations in the exchange rates between the U.S. dollar and other currencies
could result in an increase to the U.S. dollar equivalent of such expenses.

In addition, our international subsidiaries maintain net assets that are denominated in currencies

other than the functional operating currencies of these entities. As we continue to expand our
international operations, we become more exposed to the effects of fluctuations in currency exchange
rates. Accordingly, changes in the value of foreign currencies relative to the U.S. dollar can affect our
results of operations due to transactional and translational remeasurements. As a result of such foreign
currency exchange rate fluctuations, it could be more difficult to detect underlying trends in our business
and results of operations. In addition, to the extent that fluctuations in currency exchange rates cause our
results of operations to differ from our expectations or the expectations of our investors and securities
analysts who follow our stock, the trading price of our Class A common stock could be adversely affected.

We recently implemented a program to hedge transactional exposure against the Euro, and may do so

in the future with respect to other foreign currencies. We also use derivative instruments, such as foreign
currency forward and option contracts, to hedge certain exposures to fluctuations in foreign currency
exchange rates. The use of such hedging activities may not offset any or more than a portion of the adverse
financial effects of unfavorable movements in foreign exchange rates over the limited time the hedges are
in place. Moreover, the use of hedging instruments may introduce additional risks if we are unable to
structure effective hedges with such instruments.

Our ability to use our net operating losses and certain other tax attributes to offset future taxable income and taxes
may be subject to certain limitations.

As of December 31, 2021, we had federal, state and foreign net operating loss carryforwards
(“NOLs”), of $4.2 billion, $2.7 billion and $268.7 million, respectively. Utilization of these NOL
carryforwards depends on our future taxable income, and there is risk that a portion of our existing NOLs
could expire unused, and that even if we achieve profitability, the use of our unexpired NOLs would be
subject to limitations, which could materially and adversely affect our operating results.

U.S. federal NOLs generated in taxable years beginning before January 1, 2018, may be carried
forward only 20 years to offset future taxable income, if any. Under current law, U.S. federal NOLs
generated in taxable years beginning after December 31, 2017, can be carried forward indefinitely, but the
deductibility of such U.S. federal NOLs in taxable years beginning after December 31, 2020, is limited to
80% of taxable income. It is uncertain if and to what extent various states will conform to federal law.

Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended (the “Code”), and

corresponding provisions of state law, a corporation that undergoes an “ownership change” (generally
defined as a greater than 50-percentage-point cumulative change (by value) in the equity ownership of
certain stockholders over a rolling three-year period) is subject to limitations on its ability to utilize its pre-
change NOLs and other pre-change tax attributes to offset post-change taxable income and taxes. Our
existing NOLs and other tax attributes may be subject to limitations arising from previous ownership
changes, and if we undergo an ownership change in the future, our ability to utilize NOLs could be further
limited by Section 382 of the Code. Future changes in our stock ownership, some of which may be outside
of our control, could result in an ownership change under Section 382 of the Code. In addition, at the state
level, there may be periods during which the use of NOL carryforwards is suspended or otherwise limited,
which could accelerate or permanently increase state taxes owed.

If our estimates or judgments relating to our critical accounting policies prove to be incorrect, our results of
operations could be adversely affected.

The preparation of financial statements in conformity with U.S. GAAP requires management to make

estimates and assumptions that affect the amounts reported in the consolidated financial statements and
accompanying notes. We base our estimates on historical experience and on various other assumptions
that we believe to be reasonable under the circumstances, as provided in Part I, Item 2, “Management’s
Discussion and Analysis of Financial Condition and Results of Operations.” The results of these estimates
form the basis for making judgments about the carrying values of assets, liabilities and equity, and the
amount of revenue and expenses that are not readily apparent from other sources. Assumptions and
estimates used in preparing our consolidated financial statements include those related to revenue
recognition and business combinations. Our results of operations may be adversely affected if our
assumptions change or if actual circumstances differ from those in our assumptions, which could cause our
results of operations to fall below the expectations of securities analysts and investors, resulting in a decline
in the trading price of our Class A common stock.

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Changes in financial accounting standards or practices may cause adverse, unexpected financial reporting
fluctuations and affect our results of operations.

A change in accounting standards or practices may have a significant effect on our results of
operations and may even affect our reporting of transactions completed before the change is effective.
New accounting pronouncements and varying interpretations of accounting pronouncements have
occurred and may occur in the future. Changes to existing rules or the questioning of current practices may
adversely affect our reported financial results or the way we conduct our business.

For example, Accounting Standards Codification (“ASC”) 842, “Leases” that became effective
January 1, 2019, had a material impact on our consolidated financial statements as described in detail in
Note 2 to the consolidated financial statements included in our Annual Report on Form 10-K for the year
ended December 31, 2020, filed with the SEC on February 26, 2021. Adoption of these types of accounting
standards and any difficulties in implementation of changes in accounting principles, including the ability
to modify our accounting systems, could cause us to fail to meet our financial reporting obligations, which
result in regulatory discipline and harm investors’ confidence in us.

If we fail to maintain an effective system of disclosure controls and internal control over financial reporting, our
ability to produce timely and accurate financial statements or comply with applicable regulations could be
impaired.

As a public company, we are required to maintain internal control over financial reporting and to
report any material weaknesses in such internal control. Section 404 of the Sarbanes-Oxley Act of 2002
(the “Sarbanes-Oxley Act”) requires that we evaluate and determine the effectiveness of our internal
control over financial reporting and provide a management report on internal control over financial
reporting. A material weakness is a deficiency, or combination of deficiencies, in internal control 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.

Our current controls and any new controls that we develop may become inadequate because of
changes in conditions in our business. Further, weaknesses in our disclosure controls and internal control
over financial reporting may be discovered in the future. In addition, if we acquire additional businesses,
we may not be able to successfully integrate the acquired operations and technologies and maintain
internal control over financial reporting, if applicable, in accordance with the requirements of Section 404
of the Sarbanes-Oxley Act. Any failure to develop or maintain effective controls or any difficulties
encountered in their implementation or improvement could harm our results of operations or cause us to
fail to meet our reporting obligations and may result in a restatement of our financial statements for prior
periods. Any failure to implement and maintain effective internal control over financial reporting also
could adversely affect the results of periodic management evaluations and annual independent registered
public accounting firm attestation reports regarding the effectiveness of our internal control over financial
reporting that we are required to include in our periodic reports that will be filed with the SEC. Ineffective
disclosure controls and procedures and internal control over financial reporting could also cause investors
to lose confidence in our reported financial and other information, and could have a material and adverse
effect on our business, results of operations and financial condition and could cause a decline in the
trading price of our Class A common stock. In addition, if we are unable to continue to meet these
requirements, we may not be able to remain listed on the New York Stock Exchange or the Long-Term
Stock Exchange.

If our goodwill or intangible assets become impaired, we may be required to record a significant charge to
earnings.

We review our intangible assets for impairment when events or changes in circumstances indicate the
carrying value may not be recoverable. Goodwill is required to be tested for impairment at least annually.

As of December 31, 2021, we carried a net $6.3 billion of goodwill and intangible assets. An adverse
change in market conditions, particularly if such change has the effect of changing one of our critical
assumptions or estimates, could result in a change to the estimation of fair value that could result in an
impairment charge to our goodwill or intangible assets. Any such charges may adversely affect our results
of operations.

Risks Related to Ownership of Our Class A Common Stock

The trading price of our Class A common stock has been volatile and may continue to be volatile, and you could
lose all or part of your investment.

Prior to our initial public offering in June 2016, there was no public market for shares of our Class A
common stock. On June 23, 2016, we sold shares of our Class A common stock to the public at $15.00 per
share. From June 23, 2016, the date that our Class A common stock started trading on the New York Stock
Exchange, through December 31, 2021, the trading price of our Class A common stock has ranged from
$22.80 per share to $457.30 per share. The trading price of our Class A common stock may continue to
fluctuate significantly in response to numerous factors, many of which are beyond our control, including:

• price and volume fluctuations in the overall stock market from time to time;

• volatility in the trading prices and trading volumes of technology stocks;

• changes in operating performance and stock market valuations of other technology companies

generally, or those in our industry in particular;

• sales of shares of our Class A common stock by us or our stockholders;

• failure of securities analysts to maintain coverage of us, changes in financial estimates by securities
analysts who follow our company, or our failure to meet these estimates or the expectations of
investors;

• the financial projections we may provide to the public, any changes in those projections or our

failure to meet those projections;

• announcements by us or our competitors of new products or services;

• the public’s reaction to our press releases, other public announcements and filings with the SEC;

• rumors and market speculation involving us or other companies in our industry;

• changes in laws, industry standards, regulations or regulatory enforcement in the United States or

internationally, GDPR, the California Consumer Privacy Act of 2018 and other privacy or
cybersecurity regulations that may be implemented in the future, including the Schrems II decision
invalidating the EU-U.S. Privacy Shield, SHAKEN/STIR and other robocalling prevention and
anti-spam standards and increased costs associated with such compliance, as well as enhanced
Know-Your-Client processes that impact our ability to market, sell or deliver our products;

• actual or anticipated changes in our results of operations or fluctuations in our results of

operations;

• actual or anticipated developments in our business, our competitors’ businesses or the competitive

landscape generally;

• litigation involving us, our industry or both, or investigations by regulators into our operations or

those of our competitors;

• developments or disputes concerning our intellectual property or other proprietary rights;

• announced or completed acquisitions of businesses, products, services or technologies by us or our

competitors;

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• changes in accounting standards, policies, guidelines, interpretations or principles;

• any significant change in our management; and

• general economic conditions, including due to the COVID-19 pandemic, labor shortages, supply

chain disruptions, inflation and slow or negative growth of our markets.

In addition, in the past, following periods of volatility in the overall market and the market price of a

particular company’s securities, securities class action litigation has often been instituted against these
companies. This litigation, if instituted against us, could result in substantial costs and a diversion of our
management’s attention and resources.

Substantial future sales of shares of our Class A common stock could cause the market price of our Class A
common stock to decline.

The market price of our Class A common stock could decline as a result of substantial sales of our

Class A common stock, particularly sales by our directors, executive officers and significant stockholders,
or the perception in the market that holders of a large number of shares intend to sell their shares.

Additionally, the shares of Class A common stock subject to outstanding options and restricted stock
unit awards under our equity incentive plans and the shares reserved for future issuance under our equity
incentive plans will become eligible for sale in the public market upon issuance, subject to applicable
insider trading policies.

The dual class structure of our common stock has the effect of concentrating voting control with those stockholders
who held our capital stock prior to the completion of our initial public offering, including our directors, executive
officers and their respective affiliates. This limits or precludes holders of our Class A common stock from the
ability to influence corporate matters, including the election of directors, amendments of our organizational
documents and any merger, consolidation, sale of all or substantially all of our assets, or other major corporate
transaction requiring stockholder approval.

Our Class B common stock has 10 votes per share, and our Class A common stock has one vote per

share. As of December 31, 2021, our directors, executive officers and their respective affiliates, held in the
aggregate 21.3% of the voting power of our capital stock. Because of the 10-to-one voting ratio between
our Class B common stock and Class A common stock, the holders of our Class B common stock
collectively will continue to have concentrated control of the combined voting power of our common stock
and therefore may be able to control certain matters submitted to our stockholders for approval until the
earlier of (i) June 28, 2023, or (ii) the date the holders of two-thirds of our Class B common stock elect to
convert the Class B common stock to Class A common stock. This concentrated control limits or precludes
your ability to influence corporate matters for the foreseeable future, including the election of directors,
amendments of our organizational documents, and any merger, consolidation, sale of all or substantially all
of our assets, or other major corporate transaction requiring stockholder approval. In addition, this may
prevent or discourage unsolicited acquisition proposals or offers for our capital stock that you may feel are
in your best interest as one of our stockholders.

Future transfers by holders of Class B common stock will generally result in those shares converting to

Class A common stock, subject to limited exceptions, such as certain transfers effected for estate planning
purposes. The conversion of Class B common stock to Class A common stock will have the effect, over
time, of increasing the relative voting power of those holders of Class B common stock who retain their
shares in the long term.

If securities or industry analysts cease publishing research or reports about us, our business or our market, or if
they change their recommendations regarding our Class A common stock adversely, the trading price of our
Class A common stock and trading volume could decline.

The trading market for our Class A common stock is influenced by the research and reports that
securities or industry analysts may publish about us, our business, our market or our competitors. If any of
the analysts who cover us change their recommendation regarding our Class A common stock adversely, or
provide more favorable relative recommendations about our competitors, the trading price of our Class A
common stock would likely decline. If any analyst who covers us were to cease coverage of our company or
fail to regularly publish reports on us, we could lose visibility in the financial markets, which in turn could
cause the trading price of our Class A common stock or trading volume to decline.

Anti-takeover provisions contained in our amended and restated certificate of incorporation and second amended
and restated bylaws, as well as provisions of Delaware law, could impair a takeover attempt.

Our amended and restated certificate of incorporation, second amended and restated bylaws and
Delaware law contain provisions which could have the effect of rendering more difficult, delaying, or
preventing an acquisition deemed undesirable by our board of directors. Among other things, our
amended and restated certificate of incorporation and second amended and restated bylaws include
provisions:

• authorizing “blank check” preferred stock, which could be issued by our board of directors without
stockholder approval and may contain voting, liquidation, dividend and other rights superior to our
Class A and Class B common stock;

• limiting the liability of, and providing indemnification to, our directors and officers;

• limiting the ability of our stockholders to call and bring business before special meetings;

• providing for a dual class common stock structure in which holders of our Class B common stock

have the ability to control the outcome of matters requiring stockholder approval, even if they own
significantly less than a majority of the outstanding shares of our Class A and Class B common
stock, including the election of directors and significant corporate transactions, such as a merger or
other sale of our company or its assets;

• providing that our board of directors is classified into three classes of directors with staggered

three-year terms;

• prohibit stockholder action by written consent, which requires all stockholder actions to be taken at

a meeting of our stockholders;

• requiring advance notice of stockholder proposals for business to be conducted at meetings of our

stockholders and for nominations of candidates for election to our board of directors;

• controlling the procedures for the conduct and scheduling of board of directors and stockholder

meetings; and

• providing for advance notice procedures that stockholders must comply with in order to nominate

candidates to our board of directors or to propose matters to be acted upon at a meeting of
stockholders, which may discourage or deter a potential acquirer from conducting a solicitation of
proxies to elect the acquirer’s own slate of directors or otherwise attempting to obtain control of us.

These provisions, alone or together, could delay or prevent hostile takeovers and changes in control or

changes in our management.

As a Delaware corporation, we are also subject to provisions of Delaware law, including Section 203

of the Delaware General Corporation law, which prevents certain stockholders holding more than 15% of

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our outstanding common stock from engaging in certain business combinations without approval of the
holders of at least two-thirds of our outstanding common stock not held by such 15% or greater
stockholder.

Any provision of our amended and restated certificate of incorporation, second amended and restated

bylaws or Delaware law that has the effect of delaying, preventing or deterring a change in control could
limit the opportunity for our stockholders to receive a premium for their shares of our common stock and
could also affect the price that some investors are willing to pay for our Class A common stock.

Our second amended and restated bylaws provides that the Court of Chancery of the State of Delaware is the
exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’
ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

Our second amended and restated bylaws provides that the Court of Chancery of the State of

Delaware is the exclusive forum for the following types of actions or proceedings under Delaware statutory
or common law:

• any derivative action or proceeding brought on our behalf;

• any action asserting a breach of fiduciary duty owed by our directors, officers, employees or our

stockholders;

• any action asserting a claim against us arising under the Delaware General Corporation Law; and

• any action asserting a claim against us that is governed by the internal-affairs doctrine (the

“Delaware Forum Provision”).

The Delaware Forum Provision would not apply to suits brought to enforce a duty or liability created

by the Exchange Act or any other claim under the Securities Act, for which the United States District
Court for the Northern District of California has sole and exclusive jurisdiction (the “Federal Forum
Provision”), as we are based in the State of California. In addition, our second amended and restated
bylaws provide that any person or entity purchasing or otherwise acquiring any interest in shares of our
capital stock is deemed to have notice of and consented to the Delaware Forum Provision and the Federal
Forum Provision; provided, however, that stockholders cannot and will not be deemed to have waived our
compliance with the U.S. federal securities laws and the rules and regulations thereunder.

The Delaware Forum Provision and the Federal Forum Provision may limit a stockholder’s ability to

bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or
employees, which may discourage lawsuits against us and our directors, officers and employees. If a court
were to find the Delaware Forum Provision and the Federal Forum Provision in our second amended and
restated bylaws to be inapplicable or unenforceable in an action, we may incur additional costs associated
with resolving the dispute in other jurisdictions, which could seriously harm our business.

We do not expect to declare any dividends in the foreseeable future.

We have never paid dividends and we do not anticipate declaring any cash dividends to holders of our
common stock in the foreseeable future. Consequently, investors may need to rely on sales of their Class A
common stock after price appreciation, which may never occur, as the only way to realize any future gains
on their investment. Investors seeking cash dividends should not purchase our Class A common stock.

Our indebtedness could adversely affect our financial condition.

Risks Related to our Indebtedness

As of December 31, 2021, we had $1.0 billion of indebtedness outstanding (excluding intercompany

indebtedness). Our indebtedness could have important consequences, including:

• limiting our ability to obtain additional financing to fund future working capital, capital

expenditures, acquisitions or other general corporate requirements;

• requiring a portion of our cash flows to be dedicated to debt service payments instead of other

purposes, thereby reducing the amount of cash flows available for working capital, capital
expenditures, acquisitions and other general corporate purposes;

• increasing our vulnerability to adverse changes in general economic, industry and competitive

conditions;

• exposing us to the risk of increased interest rates as certain of our borrowings, including borrowings

under a future revolving credit facility, may be at variable rates of interest; and

• increasing our cost of borrowing.

In addition, the indenture governs our 3.625% notes due 2029 (the “2029 Notes”) and our 3.875%
notes due 2031 (the “2031 Notes,” and together with the 2029 Notes, the “Notes”) and contains restrictive
covenants that limit our ability to engage in activities that may be in our long-term best interest. Our
failure to comply with those covenants could result in an event of default which, under the indenture
governing the Notes, if not cured or waived, could permit the trustee, or permit the holders of the Notes to
cause the trustee, to declare all or part of the Notes to be immediately due and payable or to exercise any
remedies provided to the trustee and/or result in the acceleration of substantially all of our indebtedness.

We may not be able to generate sufficient cash to service all of our indebtedness, including the Notes, and may be
forced to take other actions to satisfy our obligations under our indebtedness, which may not be successful.

Our ability to make scheduled payments on or to refinance our debt obligations, including the Notes,

depends on our financial condition and results of operations, which in turn are subject to prevailing
economic and competitive conditions and to certain financial, business and other factors beyond our
control. We may not be able to maintain a level of cash flows from operating activities sufficient to permit
us to pay the principal, premium, if any, and interest on our indebtedness, including the Notes.

If our cash flows and capital resources are insufficient to fund our debt service obligations, we could

face substantial liquidity problems and may be forced to reduce or delay investments and capital
expenditures, or to sell assets, seek additional capital or restructure or refinance our indebtedness,
including the Notes. Our ability to restructure or refinance our debt will depend on, among other things,
the condition of the capital markets and our financial condition at such time. Any refinancing of our debt
could be at higher interest rates and may require us to comply with more onerous covenants, which could
further restrict our business operations. The terms of existing or future debt instruments and the indenture
that governs the Notes may restrict us from adopting some of these alternatives. In addition, any failure to
make payments of interest and principal on our outstanding indebtedness on a timely basis would likely
result in a reduction of our credit rating, which could harm our ability to incur additional indebtedness. In
the absence of such cash flows and resources, we could face substantial liquidity problems and might be
required to dispose of material assets or operations to meet our debt service and other obligations.

Our inability to generate sufficient cash flows to satisfy our debt obligations, or to refinance our indebtedness on
commercially reasonable terms or at all, would materially and adversely affect our financial position and results
of operations.

If we cannot make scheduled payments on our indebtedness, we will be in default and holders of the
Notes and other indebtedness could declare all outstanding principal and interest to be due and payable,
the lenders under a future revolving credit facility could terminate their commitments to loan money, our
secured lenders could foreclose against the assets securing their borrowings and we could be forced into
bankruptcy or liquidation. If we breach the covenants under our debt instruments, we would be in default
under such instruments. The holders of such indebtedness could exercise their rights, as described above,
and we could be forced into bankruptcy or liquidation.

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The indenture governing the Notes contain cross-default provisions that could result in the acceleration of all of
our indebtedness.

A breach of the covenants under the indenture governing the Notes could result in an event of default

under the applicable indebtedness. Such a default may allow the creditors to accelerate the related
indebtedness and may result in the acceleration of any other indebtedness to which a cross-acceleration or
cross-default provision applies. In addition, an event of default under a revolving credit facility may permit
the lenders thereunder to terminate all commitments to extend further credit under that facility.
Furthermore, if we were unable to repay amounts due and payable under a secured credit facility, those
lenders could proceed against the collateral granted to them to secure that indebtedness. In the event our
note holders accelerate the repayment of our borrowings, we and our guarantors may not have sufficient
assets to repay that indebtedness. Additionally, we may not be able to borrow money from other lenders to
enable us to refinance our indebtedness.

Risks Related to our Acquisitions

We may not realize potential benefits from our recent acquisitions, partnerships and investments because of
difficulties related to integration, the achievement of synergies, and other challenges.

We regularly acquire or invest in businesses and technologies that are complementary to our business
through acquisitions, partnerships or investments, including several transactions in fiscal year 2021. There
can be no assurances that our businesses can be combined in a manner that allows for the achievement of
substantial benefits. Any integration process may require significant time and resources, and we may not
be able to manage the process successfully as our ability to acquire and integrate larger or more complex
companies, products, or technology in a successful manner is unproven. If we are not able to successfully
integrate these acquired businesses with ours or pursue our customer and product strategy successfully, the
anticipated benefits of such acquisitions may not be realized fully or may take longer than expected to be
realized. Further, it is possible that there could be a loss of our key employees and customers, disruption of
ongoing businesses or unexpected issues, higher than expected costs and an overall post-completion
process that takes longer than originally anticipated. In addition, the following issues, among others, must
be addressed in order to realize the anticipated benefits of our acquisitions, partnerships or investments:

• combining the acquired businesses’ corporate functions with our corporate functions;

• combining acquired businesses with our business in a manner that permits us to achieve the

synergies anticipated to result from such acquisitions, the failure of which would result in the
anticipated benefits of our acquisitions not being realized in the time frame currently anticipated or
at all;

• maintaining existing agreements with customers, distributors, providers, talent and vendors and

avoiding delays in entering into new agreements with prospective customers, distributors, providers,
talent and vendors;

• determining whether and how to address possible differences in corporate cultures and

management philosophies;

• integrating the companies’ administrative and information technology infrastructure;

• developing products and technology that allow value to be unlocked in the future;

• evaluating and forecasting the financial impact of such acquisitions, partnerships and investments,

including accounting charges; and

• effecting potential actions that may be required in connection with obtaining regulatory approvals.

In addition, at times the attention of certain members of our management and resources may be
focused on integration of the acquired businesses and diverted from day-to-day business operations, which
may disrupt our ongoing business.

We have incurred, and may continue to incur, significant, nonrecurring costs in connection with our

acquisitions, partnerships and investments and integrating our operations with those of the acquired
businesses, including costs to maintain employee morale and to retain key employees. Management cannot
ensure that the elimination of duplicative costs or the realization of other efficiencies will offset the
transaction and integration costs in the near term or at all.

Purchase price accounting in connection with our acquisitions requires estimates that may be subject to change
and could impact our consolidated financial statements and future results of operations and financial position.

Pursuant to the acquisition method of accounting, the purchase price we pay for our acquired
businesses is allocated to the underlying tangible and intangible assets acquired and liabilities assumed
based on their respective fair market values with any excess purchase price allocated to goodwill. The
acquisition method of accounting is dependent upon certain valuations and other studies that are
preliminary. Differences between these preliminary estimates and the final acquisition accounting may
occur, and these differences could have a material impact on the consolidated financial statements and the
combined company’s future results of operations and financial position.

General Risks

Any legal proceedings or claims against us could be costly and time-consuming to defend and could harm our
reputation regardless of the outcome.

We are and may in the future become subject to legal proceedings and claims that arise in the
ordinary course of business, such as disputes or employment claims made by our current or former
employees. Any litigation, whether meritorious or not, could harm our reputation, will increase our costs
and may divert management’s attention, time and resources, which may in turn seriously harm our
business. Insurance might not cover such claims, might not provide sufficient payments to cover all the
costs to resolve one or more such claims, and might not continue to be available on terms acceptable to us.
A claim brought against us that is uninsured or underinsured could result in unanticipated costs and could
seriously harm our business.

Unfavorable conditions in our industry or the global economy or reductions in spending on information
technology and communications could adversely affect our business, results of operations and financial condition.

Our results of operations may vary based on the impact of changes in our industry or the global

economy on our customers. Our results of operations depend in part on demand for information
technology and cloud communications. In addition, our revenue is dependent on the usage of our
products, which in turn is influenced by the scale of business that our customers are conducting. To the
extent that weak economic conditions, including due to the COVID-19 pandemic, labor shortages, supply
chain disruptions and inflation, geopolitical developments, such as existing and potential trade wars, and
other events outside of our control such as the COVID-19 pandemic, result in a reduced volume of
business for, and communications by, our customers and prospective customers, demand for, and use of,
our products may decline. Furthermore, weak economic conditions may make it more difficult to collect on
outstanding accounts receivable and increase our expenses. Additionally, we generate a portion of our
revenue from small and medium-sized businesses, which may be affected by economic downturns and
other adverse macroeconomic conditions to a greater extent than enterprises, and typically have more
limited financial resources, including capital borrowing capacity, than enterprises. If our customers reduce
their use of our products, or prospective customers delay adoption or elect not to adopt our products, as a
result of a weak economy or rising inflation and increased costs, this could adversely affect our business,
results of operations and financial condition.

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Our business is subject to the risks of pandemics, earthquakes, fire, floods and other natural catastrophic events,
and to interruption by man-made problems such as power disruptions, computer viruses, data security breaches or
terrorism.

Our business operations are subject to interruption by natural disasters, flooding, fire, power

shortages, pandemics such as COVID-19, terrorism, political unrest, cyber-attacks, geopolitical instability,
war, the effects of climate change and other events beyond our control. For example, our corporate
headquarters are located in the San Francisco Bay Area, a region known for seismic activity. A significant
natural disaster, such as an earthquake, fire or flood, occurring at our headquarters, at one of our other
facilities or where a business partner is located could adversely affect our business, results of operations
and financial condition. Further, if a natural disaster or man-made problem were to affect our service
providers, this could adversely affect the ability of our customers to use our products and platform. Natural
disasters, pandemics, such as the COVID-19 pandemic, and acts of terrorism could cause disruptions in
our or our customers’ businesses, national economies or the world economy as a whole.

We also rely on our network and third-party infrastructure and enterprise applications and internal

technology systems for our engineering, sales and marketing, and operations activities. Although we
maintain incident management and disaster response plans, in the event of a major disruption caused by a
natural disaster or man-made problem, we may be unable to continue our operations and may endure
system interruptions, reputational harm, delays in our development activities, lengthy interruptions in
service, breaches of data security and loss of critical data, any of which could adversely affect our business,
results of operations and financial condition.

In addition, computer malware, viruses and computer hacking, fraudulent use attempts and phishing

attacks have become more prevalent in our industry, have occurred on our platform in the past and may
occur on our platform in the future. Though it is difficult to determine what, if any, harm may directly
result from any specific interruption or attack, any failure to maintain performance, reliability, security,
integrity and availability of our products and technical infrastructure to the satisfaction of our users may
harm our reputation and our ability to retain existing users and attract new users. In addition, global
climate change could result in certain types of natural disasters occurring more frequently or with more
intense effects. Any such events may result in users being subject to service disruptions or outages, and we
may not be able to recover our technical infrastructure in a timely manner to maintain or resume
operations, which may adversely affect our financial results.

Climate change may have an impact on our business.

While we seek to mitigate our business risks associated with climate change (such as drought,
wildfires, hurricanes, increased storm severity and sea level rise), we recognize that there are inherent
climate-related risks wherever business is conducted. Our primary locations may be vulnerable to the
adverse effects of climate change. For example, certain of our offices have experienced, and are projected
to continue to experience, climate-related events at an increasing frequency, including drought, heat
waves, wildfires and resultant air quality impacts and power shutoffs associated with wildfire prevention.
Changing market dynamics, global policy developments and the increasing frequency and impact of
extreme weather events on critical infrastructure in the U.S. and elsewhere have the potential to disrupt
our business, the business of our third-party suppliers and the business of our customers, and may cause us
to experience losses and additional costs to maintain or resume operations. In addition, we may be subject
to increased regulations, reporting requirements, standards or expectations regarding the environmental
impacts of our business.

Item 1B. Unresolved Staff Comments

None.

Item 2.

Properties

We lease all of our facilities and do not own any real property. Our headquarters is located in San

Francisco, California, where we have sub-leased several floors, consisting of 259,416 square feet of office
space at 101 Spear Street. The sub-lease covers several floors for which the terms commenced on
December 1, 2018 and April 1, 2020 and will be expiring at various dates between March 2025 and June
2028. Our existing lease obligations are secured by letters of credit with a cumulative value of $23.7 million
as of December 31, 2021.

We also lease approximately 600,000 square feet in various locations in North America, South
America, Europe and Asia. This includes our international headquarters in Dublin, Ireland and regional
offices used for business operations, sales, support, and product development.

Additional information regarding our lease commitments is available in Note 6 of our consolidated

financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data” included
elsewhere in this Annual Report on Form 10-K.

We intend to procure additional space in the future as we continue expand geographically and add
employees. We believe our facilities are adequate and suitable for our current needs and that, should it be
needed, suitable additional or alternative space will be available to accommodate our operations.

Item 3.

Legal Proceedings

Refer to Note 13(b) of our consolidated financial statements included elsewhere in this Annual

Report on Form 10-K for a description of our current material legal proceedings.

Item 4. Mine Safety Disclosures

Not applicable.

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity

PART II

Securities

Market Price of Our Class A Common Stock

Our Class A common stock is traded on the New York Stock Exchange and, as of August 2021, the
Long-Term Stock Exchange under the symbol “TWLO.” As of January 31, 2022, we had 196 holders of
record of our Class A and Class B common stock. The actual number of stockholders is greater than this
number of record holders and includes stockholders who are beneficial owners but whose shares are held
in street name by brokers and other nominees.

Dividend Policy

We have never declared or paid any cash dividends on our capital stock. We intend to retain any

future earnings and do not expect to pay any dividends in the foreseeable future.

Stock Performance Graph

This performance graph shall not be deemed “soliciting material” or to be “filed” with the SEC for
purposes of Section 18 of the Exchange Act, or otherwise subject to the liabilities under that Section, and shall
not be deemed to be incorporated by reference into any filing of Twilio Inc. under the Securities Act or the
Exchange Act.

We have presented below the cumulative total return to our stockholders between June 23, 2016 (the

date our Class A common stock commenced trading on the NYSE) through December 31, 2021, in
comparison to the S&P 500 Index and S&P 500 Information Technology Index. All values assume a $100
initial investment and data for the S&P 500 Index and S&P 500 Information Technology Index assume
reinvestment of dividends. The comparisons are based on historical data and are not indicative of, nor
intended to forecast, the future performance of our Class A common stock.

$1,400

$1,300

$1,200

$1,100

$1,000

$900

$800

$700

$600

$500

$400

$300

$200

$100

$0
Jun-16 Jun-16

Dec-16

Jun-17

Dec-17

Jun-18

Dec-18

Jun-19

Dec-19

Jun-20

Dec-20

Jun-21

Dec-21

Twilio Inc

S&P 500 Index

S&P 500 Info Tech Index

Recent Sales of Unregistered Securities and Use of Proceeds from Registered Securities

(a) Sales of Unregistered Securities

In each of the years ended December 31, 2021 and 2020, Twilio.org donated 88,408 shares of our

unregistered Class A common stock to an independent donor advised fund to further our philanthropic
goals. The shares were “restricted securities” for purposes of Rule 144 under the Securities Act of 1933, as
amended (the “Securities Act”), and had an aggregate fair market value on the date of donation of
$31.2 million and $19.0 million, respectively.

In 2018, we issued $550.0 million in aggregate principal amount of 0.25% Convertible Senior Notes

due 2023 (the “Convertible Notes”). In connection with the offering of the Convertible Notes, we entered
into privately-negotiated capped call transactions with certain counterparties (the “capped calls”). The
capped calls each had an initial strike price of approximately $70.90 per share, subject to certain
adjustments, which corresponds to the initial conversion price of the Convertible Notes. The capped calls
had initial cap prices of $105.04 per share, subject to certain adjustments. The capped calls covered, subject
to anti-dilution adjustments, approximately 7,757,200 shares of Class A Common Stock. Refer to Note 10
to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K for
additional information about the Convertible Notes and capped calls.

We offered and sold the Convertible Notes to the initial purchasers in reliance on the exemption from

registration provided by Section 4(a)(2) of the Securities Act and for resale by the initial purchasers to
qualified institutional buyers pursuant to the exemption from registration provided by Rule 144A under
the Securities Act. We relied on these exemptions from registration based in part on representations made
by the initial purchasers in the purchase agreement dated May 14, 2018. On May 18, 2021, we issued a
notice of redemption for our Convertible Notes and in June 2021, we redeemed all of the remaining
outstanding principal amount of the Convertible Notes and settled all related capped call arrangements.
These transactions are described in detail in Note 10 to our consolidated financial statements included
elsewhere in this Annual Report on Form 10-K.

In connection with our acquisition of Zipwhip in July 2021, we issued an additional 526 shares of
unregistered Class A common stock on November 15, 2021, pursuant to a post-closing adjustment. These
issuances were exempt from registration under the Securities Act by virtue of Section 4(a)(2) of the
Securities Act and Rule 506 of Regulation D promulgated thereunder.

(b) Use of Proceeds

In February 2021, we closed a follow-on public offering, in which we sold 4,312,500 shares of Class A

common stock at a price to the public of $409.60 per share, including shares sold in connection with the
exercise of the underwriters’ option to purchase additional shares. The offer and sale of all of the shares in
the follow-on offering were registered under the Securities Act pursuant to a registration statement on
Form S-3 (File No. 333-231794), which was declared effective by the SEC on May 29, 2019. We raised
$1.8 billion in net proceeds after deducting offering expenses paid by us. No payments were made by us to
directors, officers or persons owning 10 percent or more of our capital stock or to their associates, or to
our affiliates, other than payments in the ordinary course of business to officers for salaries. There has
been no material change in the planned use of proceeds from our follow-on offering as described in our
final prospectus filed with the SEC on February 22, 2021, pursuant to Rule 424(b)(5). We invested the
funds received in accordance with our board-approved investment policy, which provides for investments
in obligations of the U.S. government, money market instruments, registered money market funds and
corporate bonds. The managing underwriters of our follow-on offering were Morgan Stanley & Co. LLC,
J.P. Morgan Securities LLC, Academy Securities, Inc., Cabrera Capital Markets LLC, and Siebert
Williams Shank & Co., LLC.

In August 2020, we closed a follow-on public offering, in which we sold 5,819,838 shares of Class A
common stock at a price to the public of $247.00 per share, including shares sold in connection with the

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exercise of the underwriters’ option to purchase additional shares. The offer and sale of all of the shares in
the follow-on offering were registered under the Securities Act pursuant to a registration statement on
Form S-3 (File No. 333-231794), which was declared effective by the SEC on May 29, 2019. We raised
$1.4 billion in net proceeds after deducting underwriting discounts and commissions and offering expenses
paid by us. No payments were made by us to directors, officers or persons owning 10 percent or more of
our capital stock or to their associates, or to our affiliates, other than payments in the ordinary course of
business to officers for salaries. There has been no material change in the planned use of proceeds from
our follow-on offering as described in our final prospectus filed with the SEC on August 7, 2020, pursuant
to Rule 424(b)(5). We invested the funds received in accordance with our board-approved investment
policy, which provides for investments in obligations of the U.S. government, money market instruments,
registered money market funds and corporate bonds. The managing underwriters of our follow-on offering
were J.P. Morgan Securities LLC, Morgan Stanley & Co. LLC, Goldman, Sachs & Co. and BofA
Securities, Inc.

In June 2019, we closed a follow-on public offering, in which we sold 8,064,515 shares of Class A
common stock at a price to the public of $124.00 per share, including shares sold in connection with the
exercise of the underwriters’ option to purchase additional shares. The offer and sale of all of the shares in
the follow-on offering were registered under the Securities Act pursuant to a registration statement on
Form S-3 (File No. 333-231794), which was declared effective by the SEC on May 29, 2019. We raised
$979.0 million in net proceeds after deducting underwriting discounts and commissions and offering
expenses paid by us. No payments were made by us to directors, officers or persons owning 10 percent or
more of our capital stock or to their associates, or to our affiliates, other than payments in the ordinary
course of business to officers for salaries. There has been no material change in the planned use of
proceeds from our follow-on offering as described in our final prospectus filed with the SEC on May 31,
2019, pursuant to Rule 424(b). We invested the funds received in accordance with our board-approved
investment policy, which provides for investments in obligations of the U.S. government, money market
instruments, registered money market funds and corporate bonds. The managing underwriters of our
follow-on offering were Goldman, Sachs & Co. and J.P. Morgan Securities LLC.

None.

Item 6.

[Reserved]

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion and analysis of our financial condition and results of operations should be read

in conjunction with our consolidated financial statements and related notes appearing elsewhere in this Annual
Report on Form 10-K. In addition to historical financial information, the following discussion contains
forward-looking statements that are based upon current plans, expectations and beliefs that involve risks and
uncertainties. Our actual results may differ materially from those anticipated in these forward-looking
statements as a result of various factors, including those set forth under Part I, Item 1A, “Risk Factors” in this
Annual Report on Form 10-K. Our fiscal year ends on December 31.

Overview

We are the leader in the cloud communications platform category. We enable developers to build,
scale and operate real-time customer engagement within their software applications. We offer a customer
engagement platform with software designed to address specific use cases like account security and contact
centers, and a set of Application Programming Interfaces (“APIs”) that handles the higher level
communication logic needed for nearly every type of customer engagement. The power, flexibility and
reliability offered by our software building blocks empower companies of virtually every shape and size to

build world-class engagement into their customer experience. For additional detail on the description of
our business and products please refer to Part I, Item 1, “Business”, included elsewhere on this Annual
Report on Form 10-K.

We have achieved significant growth in recent periods. In the years ended December 31, 2021, 2020

and 2019, our revenue was $2.8 billion, $1.8 billion and $1.1 billion, respectively, and our net loss was
$949.9 million, $491.0 million and $307.1 million, respectively. In the years ended December 31, 2021, 2020
and 2019, our 10 largest Active Customer Accounts generated an aggregate of 11%, 14% and 13% of our
total revenue, respectively.

Acquisition of Zipwhip, Inc. in 2021

In July 2021, we acquired Zipwhip, Inc. (“Zipwhip”), a leading provider of toll-free messaging in the
United States, for a purchase price of $838.8 million. The purchase price was paid in the form of shares of
our Class A common stock and cash and included fair value of pre-combination services of Zipwhip
employees that was embedded in the unvested equity awards which we assumed on the acquisition closing
date. Part of the cash was paid to settle the vested stock options of Zipwhip employees that were outstanding
on the acquisition closing date. We assumed all unvested and outstanding stock options and restricted stock
units of Zipwhip continuing employees as converted into our own respective equity awards at the conversion
ratio provided in the Agreement and Plan of Merger and Reorganization. Vesting of Class A shares of our
common stock and assumed equity awards that were subject to service conditions is recorded into our stock-
based compensation expense as the services are provided. This acquisition is described in detail in Note 7 to
our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

Because the acquisition of Zipwhip occurred during the year ended December 31, 2021, the information

presented in this section with respect to the year ended December 31, 2021 includes the contribution of
Zipwhip starting from July 14, 2021, the date of acquisition. The information with respect to the periods prior
to the date of acquisition relates to Twilio on a standalone basis, not including Zipwhip. As a result,
comparisons to prior periods may not be indicative of future results or future rates of growth.

Acquisition of Segment.io, Inc. in 2020

In November 2020, we acquired Segment.io, Inc. (“Segment”), the market-leading customer data
platform, for a purchase price of $3.0 billion. The purchase price was paid in the form of shares of our
Class A common stock and cash and included fair value of pre-combination services of Segment employees
that was embedded in the unvested equity awards which we assumed on the acquisition closing date. Part
of the cash was paid to settle the vested equity awards of Segment employees that were outstanding on the
acquisition closing date. We assumed all unvested and outstanding equity awards of Segment continuing
employees as converted into our own equity awards at the conversion ratio provided in the Agreement and
Plan of Reorganization. Vesting of Class A shares of our common stock and assumed equity awards that
were subject to service conditions is recorded into our stock-based compensation expense over the period
the services are provided. This acquisition is described in detail in Note 7 to our consolidated financial
statements included elsewhere in this Annual Report on Form 10-K.

Because the acquisition of Twilio Segment occurred during the year ended December 31, 2020, the

information presented in this section with respect to the year ended December 31, 2020 includes the
contribution of Twilio Segment starting from November 2, 2020, the date of acquisition. The information
with respect to periods prior to the date of acquisition relates to Twilio on a standalone basis, not including
Segment. The information with respect to year 2021 includes Segment results for the full year. As a result,
comparisons to prior periods or the current full year period may not be indicative of future results or
future rates of growth.

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Investment in Syniverse Corporation

In February 2021, we entered into a Framework Agreement, as amended, with Syniverse Corporation

(“Syniverse”) and Carlyle Partners V Holdings, L.P., (“Framework Agreement”), pursuant to which
Syniverse would issue to us shares of Syniverse common stock in consideration for an investment by us of
up to $750.0 million, subject to certain terms and conditions. The initial agreements and conditions to
closing of this transaction are described in detail in Note 13(a) to our consolidated financial statements
included elsewhere in this Annual Report on Form 10-K.

On February 9, 2022, Syniverse mutually terminated a proposed Agreement and Plan of Merger with
M-3 Brigade Acquisition II Corp. (“MBAC”) because the rate of MBAC shareholder redemptions for the
proposed transaction would have exceeded the minimum cash condition for closing, which occurred as a
result of recent changes in market conditions (“MBAC Transaction Termination”). Because of the MBAC
Transaction Termination, Twilio will not purchase any shares of common stock of, or make any investment
in, MBAC.

The Framework Agreement, dated as of February 26, 2021, by and between Twilio, Syniverse and
Carlyle Partners V Holdings, L.P., remains in full force and effect. The amendment, dated as of August 16,
2021, to the Framework Agreement terminated on February 9, 2022, as a result of the MBAC Transaction
Termination. Pursuant to the terms and subject to the closing conditions set forth in the Framework
Agreement, the parties thereto are pursuing the alternative transaction, whereby Twilio will make a
minority investment of $500.0 million to $750.0 million in Syniverse and the parties (or their applicable
subsidiaries) will enter into a wholesale agreement.

Public Equity Offerings

In February 2021, August 2020 and June 2019, we completed public equity offerings in which we sold

4,312,500 shares, 5,819,838 shares and 8,064,515 shares, respectively, of our Class A common stock at
public offering prices of $409.60 per share, $247.00 per share and $124.00 per share, respectively. We
received aggregate proceeds of $1.8 billion, $1.4 billion and $979.0 million, respectively, after deducting
underwriting discounts and offering expenses paid by us.

Issuance of 2029 and 2031 Senior Notes

In March 2021, we issued and sold $1.0 billion aggregate principal amount of senior notes, consisting

of $500.0 million principal amount of 3.625% notes due 2029 (the “2029 Notes”) and $500.0 million
principal amount of 3.875% notes due 2031 (the “2031 Notes,” and together with the 2029 Notes, the
“Notes”). The net proceeds from the offering of these Notes were approximately $984.7 million, after
deducting underwriting discounts and issuance costs paid by us. These Notes are described in detail in
Note 10 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

Redemption of Convertible Senior Notes and Capped Call Transactions

During 2021 we issued a notice of redemption for our convertible senior notes due 2023 (the

“Convertible Notes”) and on June 2, 2021, we redeemed all of the remaining outstanding principal amount
of the notes. During 2021 and through the date of the redemption, we converted $343.7 million aggregate
principal amount of the Convertible Notes by issuing 4,846,965 shares of our Class A common stock. The
extinguishment of these notes resulted in a $29.0 million loss that is included in other (expenses) income,
net, in our consolidated statement of operations included elsewhere in this Annual Report on Form 10-K.

Concurrently with the principal redemption, we settled the related capped call arrangements that

were entered into contemporaneously with the Convertible Notes offering in May 2018. The capped call
arrangements were settled for gross cash consideration of $229.8 million that we received and recorded as
additional paid-in-capital, net of $1.4 million of transaction costs and a $3.2 million realized gain. These
transactions are described in detail in Note 10 to our consolidated financial statements included elsewhere
in this Annual Report on Form 10-K.

COVID-19 UPDATE

The rapid spread of the COVID-19 globally has disrupted, and may continue to disrupt, our

day-to-day operations and the operations of our customers, partners and service providers for an indefinite
period of time, including as a result of changing public health recommendations, travel restrictions and
limitations, the duration, spread and severity and potential recurrence of the virus and its variants, as well
as the efficacy of vaccines and vaccine distribution and the timing and trajectory of the economic recovery,
all of which could negatively impact our business and results of operations and financial condition. Since
mid-March 2020, we have taken precautionary measures to protect our employees and contingent workers
and to help minimize the spread of the virus by temporarily closing our worldwide offices and minimizing
business travel. We have continued to monitor the progress of vaccination efforts around the world. In the
second half of 2021, as COVID-19 related restrictions have eased in some geographies, we commenced a
phased reopening for certain offices.

The broader implications of COVID-19 on our results of operations and overall financial

performance remain uncertain. The COVID-19 pandemic and its adverse effects on economic and market
conditions, including labor shortages, supply chain disruptions and inflation, have been prevalent in the
locations where we, our customers, our suppliers or our third-party business partners conduct business.
These adverse conditions may continue for an extended period and there may be additional impacts to the
economy and our business as a result of COVID-19. This could result in decreased business spending by
our customers and prospective customers and business partners and third-party business partners, reduced
demand for our solutions, lower renewal rates by our customers, longer or delayed sales cycles, including
customers and prospective customers delaying contract signing or contract renewals, or reducing budgets
or minimum commitments related to the product and services that we offer, all of which could have an
adverse impact on our business operations and financial condition. See the risk factor titled “The global
COVID-19 pandemic may adversely impact our business, results of operations and financial condition” in
Part I, Item 1A, “Risk Factors” of this Annual Report on Form 10-K for further discussion of the possible
impact of the COVID-19 pandemic on our business, financial condition and results of operations.

Key Business Metrics

Year Ended December 31,
2020

2021

2019

Number of Active Customer Accounts (as of end date

of period)(1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total Revenue (in thousands)(1) . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . .
Dollar-Based Net Expansion Rate(2) . . . . . . . . . . . . . . . .

Total Revenue Growth Rate(1)

256,000
$2,841,839

221,000
$1,761,776

179,000
$1,134,468

61%
131%

55%
137%

75%
135%

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(1)

Includes the contributions from our Zipwhip business, acquired July 14, 2021; Twilio Segment
business, acquired November 2, 2020; Twilio SendGrid business, acquired February 1, 2019; and other
smaller acquisitions from the dates of their respective acquisitions except for the Number of Active
Customer Accounts, which excludes customer accounts from our Zipwhip business.

(2) As previously announced in our Annual Report on Form 10-K filed with the SEC on March 2, 2020,
commencing with the three-month period ended March 31, 2020, we calculate our Dollar-Based Net
Expansion Rate by comparing total revenue from a cohort of Active Customer Accounts in a period
to the same period in the prior year (the “New DBNE Definition”). To facilitate comparison between
the periods presented, Dollar-Based Net Expansion Rate as presented in the table above has been
calculated as if the New DBNE Definition had been in effect during that period. As a result of the
New DBNE Definition, unless specifically identified as being calculated using total revenue, any
Dollar-Based Net Expansion Rates disclosed by us in our SEC filings, press releases and presentations

prior to the date of our press release for the three months ended March 31, 2020, will not be directly
comparable to our Dollar-Based Net Expansion Rates going forward. Unless an acquisition closes on
the first day of a quarter, revenue from an acquisition will not impact this calculation until the quarter
following the one year anniversary of the acquisition.

Number of Active Customer Accounts. We believe that the number of Active Customer Accounts is an

important indicator of the growth of our business, the market acceptance of our platform and future
revenue trends. We define an “Active Customer Account” at the end of any period as an individual
account, as identified by a unique account identifier, for which we have recognized at least $5 of revenue in
the last month of the period. We believe that use of our platform by customers at or above the $5 per
month threshold is a stronger indicator of potential future engagement than trial usage of our platform or
usage at levels below $5 per month. In the years ended December 31, 2021, 2020 and 2019, revenue from
Active Customer Accounts represented over 99% of total revenue in each period. A single organization
may constitute multiple unique Active Customer Accounts if it has multiple account identifiers, each of
which is treated as a separate Active Customer Account.

Dollar-Based Net Expansion Rate. Our ability to drive growth and generate incremental revenue
depends, in part, on our ability to maintain and grow our relationships with existing Active Customer
Accounts and to increase their use of the platform. An important way in which we have historically tracked
performance in this area is by measuring the Dollar-Based Net Expansion Rate for Active Customer
Accounts. Our Dollar-Based Net Expansion Rate increases when such Active Customer Accounts increase
their usage of a product, extend their usage of a product to new applications or adopt a new product. Our
Dollar-Based Net Expansion Rate decreases when such Active Customer Accounts cease or reduce their
usage of a product or when we lower usage prices on a product. As our customers grow their businesses
and extend the use of our platform, they sometimes create multiple customer accounts with us for
operational or other reasons. As such, when we identify a significant customer organization (defined as a
single customer organization generating more than 1% of revenue in a quarterly reporting period) that has
created a new Active Customer Account, this new Active Customer Account is tied to, and revenue from
this new Active Customer Account is included with, the original Active Customer Account for the
purposes of calculating this metric. We believe that measuring Dollar-Based Net Expansion Rate provides
a more meaningful indication of the performance of our efforts to increase revenue from existing
customers.

Net Loss Carryforwards

At December 31, 2021, we had federal, state and foreign net operating loss carryforwards of

approximately $4.2 billion, $2.7 billion and $268.7 million, respectively, and federal and state tax credits of
approximately $132.9 million and $84.9 million, respectively. If not utilized, the federal and state loss
carryforwards will expire at various dates beginning in 2029 and 2025, respectively, and the federal tax
credits will expire at various dates beginning in 2029. The state tax credits can be carried forward
indefinitely. At present, we believe that it is more likely than not that the federal and state net operating
loss and credit carryforwards will not be realized. Accordingly, a full valuation allowance has been
established for these tax attributes, as well as the rest of the federal and state deferred tax assets.

Key Components of Statements of Operations

Revenue. We derive our revenue primarily from usage-based fees earned from customers using the
software products within our Channel APIs. These usage-based software products include offerings, such
as Programmable Messaging, Programmable Voice and Programmable Video, among others. Some
examples of the usage-based fees that we charge include the number of text messages sent or received
using our Programmable Messaging products, minutes of call duration activity for our Programmable
Voice products and the number of authentications for our Verify product. In the years ended
December 31, 2021, 2020 and 2019, we generated 72%, 76% and 75% of our revenue, respectively, from
usage-based fees. We also earn monthly flat fees from certain fee-based products, such as our Email API,
Marketing Campaigns, Twilio Flex, our cloud contact center platform, and Twilio Segment, our customer
data platform.

When customers first begin using our platform, they typically pay upfront via credit card in monthly
prepaid amounts and draw down their balances as they purchase or use our products. Our larger customers
often enter into contracts for at least 12 months, that contain minimum revenue commitments, which may
contain more favorable pricing. Customers on such contracts typically are invoiced monthly in arrears for
products used.

Amounts that have been charged via credit card or invoiced are recorded in revenue, deferred
revenue or customer deposits, depending on whether the revenue recognition criteria have been met. Our
deferred revenue and customer deposits liability balance is not a meaningful indicator of our future
revenue at any point in time because the number of contracts with our invoiced customers that contain
terms requiring any form of prepayment is not significant.

We define U.S. revenue as revenue from customers with IP addresses or mailing addresses at the time

of registration in the United States, and we define international revenue as revenue from customers with
IP addresses or mailing addresses at the time of registration outside of the United States.

Cost of Revenue and Gross Margin. Cost of revenue consists primarily of fees paid to network service

providers. Cost of revenue also includes cloud infrastructure fees, direct costs of personnel, such as salaries
and stock-based compensation for our customer support employees, and non-personnel costs, such as
depreciation and amortization expense related to data centers and hosting equipment, amortization of
capitalized internal use software development costs and acquired intangibles. Our arrangements with
network service providers require us to pay fees based on the volume of phone calls initiated or text
messages sent, as well as the number of telephone numbers acquired by us to service our customers. Our
arrangements with our cloud infrastructure provider require us to pay fees based on our server capacity
consumption.

Our gross margin has been and will continue to be affected by a number of factors, including the

timing and extent of our investments in our operations; our product mix; our ability to manage our
network service provider and cloud infrastructure-related fees, including A2P SMS fees; the mix of U.S.
revenue compared to international revenue; changes in foreign exchange rates; the timing of amortization

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of capitalized software development costs and acquired intangibles; and the extent to which we periodically
choose to pass on our cost savings from platform optimization efforts to our customers in the form of lower
usage prices.

Operating Expenses. 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. We expect that our operating
costs will increase in absolute dollars as we add additional employees and invest in our infrastructure to
grow our business.

Research and Development. Research and development expenses consist primarily of personnel costs,

outsourced engineering services, cloud infrastructure fees for staging and development, amortization of
capitalized internal use software development costs, depreciation and an allocation of our general
overhead expenses. We capitalize the portion of our software development costs that meets the criteria for
capitalization.

We continue to focus our research and development efforts on adding new features and products,
including new use cases, improving our platform and increasing the functionality of our existing products.

Sales and Marketing. Sales and marketing expenses consist primarily of personnel costs, including
commissions for our sales employees. Sales and marketing expenses also include expenditures related to
advertising, marketing, our brand awareness activities and developer evangelism, costs related to our
SIGNAL customer and developer conferences, credit card processing fees, professional services fees,
depreciation, amortization of acquired intangibles and an allocation of our general overhead expenses.

We focus our sales and marketing efforts on generating awareness of our company, platform and

products, creating sales leads and establishing and promoting our brand, both domestically and
internationally. We plan to continue investing in sales and marketing by increasing our sales and marketing
headcount, supplementing our self-service model with an enterprise sales approach, expanding our sales
channels, driving our go-to-market strategies, building our brand awareness and sponsoring additional
marketing events.

General and Administrative. General and administrative expenses consist primarily of personnel costs

for our accounting, finance, legal, human resources and administrative support personnel. General and
administrative expenses also include costs related to business acquisitions, legal and other professional
services fees, certain taxes, depreciation and amortization, charitable contributions and an allocation of
our general overhead expenses. We expect that we will incur costs associated with supporting the growth of
our business and to meet the increased compliance requirements associated with our international
expansion. We may also incur higher than usual losses related to deterioration of quality of certain
financial assets caused by the macroeconomic conditions and uncertainly in the COVID-19 environment.

Our general and administrative expenses include a certain amount of prior non-income-based taxes in

certain domestic and international jurisdictions that we are subject to based on the manner we sell and
deliver our products. Additional details are provided in Note 13(d) to our consolidated financial
statements included elsewhere in this Annual Report on Form 10-K.

Provision for Income Taxes. Our income tax provision or benefit consists primarily of income taxes,

withholding taxes in foreign jurisdictions in which the Company conducts business and the tax benefit
related to the release of valuation allowance from acquisitions. The primary difference between our
effective tax rate and the federal statutory rate relates to the full valuation allowance the Company
established on the federal, state and certain foreign net operating losses and credits.

Non-GAAP Financial Measures:

We use the following non-GAAP financial information, collectively, to evaluate our ongoing
operations and for internal planning and forecasting purposes. We believe that non-GAAP financial

information, when taken collectively, may be helpful to investors because it provides consistency and

comparability with past financial performance, facilitates period-to-period comparisons of results of
operations and assists in comparisons with other companies, many of which use similar non-GAAP
financial information to supplement their GAAP results. Non-GAAP financial information is presented
for supplemental informational purposes only, should not be considered a substitute for financial
information presented in accordance with generally accepted accounting principles, and may be different
from similarly-titled non-GAAP measures used by other companies. Whenever we use a non-GAAP
financial measure, a reconciliation is provided to the most closely applicable financial measure stated in
accordance with generally accepted accounting principles. Investors are encouraged to review the related
GAAP financial measures and the reconciliation of these non-GAAP financial measures to their most
directly comparable GAAP financial measures.

Non-GAAP Gross Profit and Non-GAAP Gross Margin. For the periods presented, we define non-

GAAP gross profit and non-GAAP gross margin as GAAP gross profit and GAAP gross margin,
respectively, adjusted to exclude, as applicable, certain expenses as presented in the table below:

Reconciliation:
Gross profit
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-GAAP adjustments:

Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of acquired intangibles . . . . . . . . . . . . . . . .
Payroll taxes related to stock-based compensation . . . . .

Year Ended December 31,

2021

2020

2019

$1,390,713

(In thousands)
$915,661

$608,917

49%

52%

54%

14,074
114,896
—

8,857
59,501
—

7,123
45,267
104

Non-GAAP gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 1,519,683

$ 984,019

$ 661,411

Non-GAAP gross margin . . . . . . . . . . . . . . . . . . . . . . . . . . . .

53%

56%

58%

Non-GAAP Operating Expenses. For the periods presented, we define non-GAAP operating
expenses (including categories of operating expenses) as GAAP operating expenses (and categories of
operating expenses) adjusted to exclude, as applicable, certain expenses as presented in the table below:

Reconciliation:
Operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-GAAP adjustments:

Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . .
Amortization of acquired intangibles . . . . . . . . . . . . . .
Acquisition-related expenses . . . . . . . . . . . . . . . . . . . . .
Charitable contributions . . . . . . . . . . . . . . . . . . . . . . . . .
Payroll taxes related to stock-based compensation . . .

Year Ended December 31,

2021

2020

2019

$2,306,297

(In thousands)
$1,408,562

$ 978,702

(618,211)
(83,888)
(7,449)
(31,169)
(48,417)

(353,054)
(38,993)
(21,765)
(18,993)
(27,389)

(257,195)
(27,540)
(15,713)
—
(15,084)

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Non-GAAP operating expenses . . . . . . . . . . . . . . . . . .

$1,517,163

$ 948,368

$ 663,170

Non-GAAP Income (Loss) from Operations and Non-GAAP Operating Margin. For the periods

presented, we define non-GAAP income (loss) from operations and non-GAAP operating margin as
GAAP loss from operations and GAAP operating margin, respectively, adjusted to exclude, as applicable,
certain expenses as presented in the table below:

Reconciliation:
Loss from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating margin . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-GAAP adjustments:

Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of acquired intangibles . . . . . . . . . . . . . . .
Acquisition-related expenses . . . . . . . . . . . . . . . . . . . . . .
Charitable contributions . . . . . . . . . . . . . . . . . . . . . . . . . .
Payroll taxes related to stock-based compensation . . . .

Year Ended December 31,

2021

2020

2019

$(915,584)

(In thousands)
$(492,901)

$(369,785)

(32)%

(28)%

(33)%

632,285
198,784
7,449
31,169
48,417

361,911
98,494
21,765
18,993
27,389

264,318
72,807
15,713
—
15,188

Non-GAAP income (loss) from operations . . . . . . . . . .

2,520

$ 35,651

(1,759)

Non-GAAP operating margin . . . . . . . . . . . . . . . . . . . . .

—%

Results of Operations

The following tables set forth our results of operations for the periods presented and as a percentage

of our total revenue for those periods. We have included Zipwhip in our results of operations prospectively
after July 14, 2021, Twilio Segment after November 2, 2020; Twilio SendGrid after February 1, 2019, and
all other acquisitions from the respective closing dates of each such acquisition. The period-to-period
comparison of our historical results are not necessarily indicative of the results that may be expected in the
future.

Our results of operations may be significantly affected by many factors, such as uncertainty regarding

the impacts of the COVID-19 pandemic, fluctuations in foreign exchange rates, changes in global
economic conditions and customer demand and spending, inflation, labor market constraints, world events
and existing and new domestic and foreign laws and regulations, as well as those factors outlined in Part I,
Item 1A, “Risk Factors.”

Our revenue is primarily derived from usage-based fees we charge for certain of our products, which

can lead to variability and at times create significant differences between forecasts and actual results. In
addition, our product mix and mix of international and domestic customers may significantly impact our
gross margin. Because usage trends by geographic region and by customer are inherently difficult to
estimate, our actual results could differ materially from our estimates.

Year Ended December 31,

2021

2020

2019

(In thousands, except share and per share amounts)

Consolidated Statements of Operations Data:
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of revenue(1)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Gross profit

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Operating expenses:

Research and development (1)(2) . . . . . . . . . . . . . . . . . . . . . . .
Sales and marketing (1)(2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative (1)(2) . . . . . . . . . . . . . . . . . . . . . . .

Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . .

Loss from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . .

Other (expenses) income, net

Loss before benefit for income taxes . . . . . . . . . . . . . . . . .
Benefit for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Net loss attributable to common stockholders . . . . . . . . .

Net loss per share attributable to common stockholders,
basic and diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Weighted-average shares used in computing net loss per
share attributable to common stockholders, basic and
diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(1)

Includes stock-based compensation expense as follows:

2,841,839
1,451,126

1,390,713

789,219
1,044,618
472,460

2,306,297

(915,584)
(45,345)

(960,929)
11,029

1,761,776
846,115

1,134,468
525,551

915,661

608,917

530,548
567,407
310,607

1,408,562

(492,901)
(11,525)

(504,426)
13,447

391,355
369,079
218,268

978,702

(369,785)
7,569

(362,216)
55,153

(949,900) $

(490,979) $

(307,063)

(5.45) $

(3.35) $

(2.36)

174,180,465

146,708,663

130,083,046

Year Ended December 31,

2021

2020

2019

(In thousands)

Cost of revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales and marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 14,074
258,672
213,351
146,188

8,857
173,303
103,450
76,301

7,123
126,012
60,886
70,297

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$632,285

$361,911

$264,318

(2)

Includes amortization of acquired intangibles as follows:

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Cost of revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales and marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year Ended December 31,

2021

2020

2019

$114,896
1,260
82,493
135

(In thousands)
$59,501
—
38,915
78

$45,267
—
27,540
—

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$198,784

$98,494

$72,807

Year Ended December 31,

2021

2020

2019

Consolidated Statements of Operations, as a percentage of revenue: **
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

100% 100% 100%
48
51

Gross profit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Operating expenses:

Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales and marketing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Loss from operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other (expenses) income, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Loss before benefit for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . .
Benefit for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

28
37
17

(32)
(2)

(34)
*

30
32
18

(28)
(1)

(29)
1

34
33
19

(33)
1

(32)
5

Net loss attributable to common stockholders . . . . . . . . . . . . . . . . . . . .

(33%) (28%) (27)%

Less than 0.5% of revenue.

** Columns may not add up to 100% due to rounding.

Comparison of the Fiscal Years Ended December 31, 2021, 2020 and 2019

Revenue

Year Ended December 31,

2021

2020

2019

2020 to 2021
Change

2019 to 2020
Change

Total Revenue . . . . . . . . . . . . . . .

$2,841,839

$1,761,776

(Dollars in thousands)
$1,134,468

$1,080,063

61% $627,308

55%

2021 compared to 2020

In 2021, total revenue increased by $1.1 billion, or 61%, compared to the same period last year. This

increase was primarily attributable to an increase in the usage of our products, particularly our
Programmable Messaging products, Programmable Voice products and Email products, the adoption of
additional products by our existing customers, the additional A2P fees imposed by certain carriers and
revenue contributions from our acquisitions of Twilio Segment, Zipwhip and other businesses. The change
in usage from our existing customers was reflected in our Dollar-Based Net Expansion Rate of 131% for
the year ended December 31, 2021. The increase in usage was also attributable to a 16% increase in the
number of Active Customer Accounts, from 221,000 as of December 31, 2020, to over 256,000 as of
December 31, 2021.

In 2021, U.S. revenue and international revenue represented $1.9 billion or 66%, and $960.0 million,

or 34%, respectively, of total revenue. In 2020, U.S. revenue and international revenue represented
$1.3 billion, or 73%, and $479.6 million, or 27%, respectively, of total revenue. The increase in
international revenue was attributable to the growth in usage of our products, particularly our
Programmable Messaging products and Programmable Voice products, by our existing international
Active Customer Accounts; a 14% increase in the number of international Active Customer Accounts
driven in part by our focus on expanding our sales to customers outside of the United States; and revenue
contribution from our recent acquisitions.

2020 compared to 2019

In 2020, total revenue increased by $627.3 million, or 55%, compared to the same period last year.

This increase was primarily attributable to an increase in the usage of our products, particularly our
Programmable Messaging products and Programmable Voice products, the adoption of additional
products by our existing customers, and revenue contribution from our acquisition of our Twilio Segment
business for the period from November 2, 2020, through December 31, 2020. This increase was partially
offset by pricing decreases that we have implemented over time in the form of lower usage prices, in an
effort to increase the reach and scale of our platform. The changes in usage and prices in 2020 were
reflected in our Dollar-Based Net Expansion Rate of 137%. The increase in usage was also attributable to
a 23% increase in the number of Active Customer Accounts, from 179,000 as of December 31, 2019, to
over 221,000 as of December 31, 2020, which was also positively impacted by the customer accounts added
through the acquisition of our Twilio Segment business.

In 2020, U.S. revenue and international revenue represented $1.3 billion or 73%, and $479.6 million,

or 27%, respectively, of total revenue. In 2019, U.S. revenue and international revenue represented
$808.9 million, or 71%, and $325.6 million, or 29%, respectively, of total revenue. The increase in
international revenue was attributable to the growth in usage of our products, particularly our
Programmable Messaging products and Programmable Voice products, by our existing international
Active Customer Accounts; a 23% increase in the number of international Active Customer Accounts
driven in part by our focus on expanding our sales to customers outside of the United States; and revenue
contribution from the acquisition of our Twilio Segment business.

Cost of Revenue and Gross Margin

Year Ended December 31,

2021

2020

2019

2020 to 2021
Change

2019 to 2020
Change

Cost of revenue . . . . . . . . . . . . . . . . . . .
Gross margin . . . . . . . . . . . . . . . . . . . . .

$1,451,126

$846,115

(Dollars in thousands)
$525,551

$605,011

49%

52%

54%

72% $320,564 61%

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2021 compared to 2020

In 2021, cost of revenue increased by $605.0 million, or 72%, compared to the same period last year.
The increase in cost of revenue was primarily attributable to a $465.5 million increase in network service
providers’ costs, which included the additional A2P fees imposed by certain carriers, and a $44.2 million
increase in cloud infrastructure fees, all to support the growth in usage of our products. The increase was
also due to a $55.4 million increase in the amortization expense of intangible assets that we acquired
through business combinations. In addition, the year ended December 31, 2021, included cost of revenue
from our recent acquisitions.

In 2021, the gross margin percentage declined compared to the same period last year. This decline was

primarily driven by continued strong growth of our international messaging business, the additional A2P
fees imposed by certain carriers and an increase in network service provider fees in certain geographies,

which we pass to our customers at cost. The decline was also due to an increase in amortization expense
related to our acquired intangible assets, These declines were partially offset by the growth of our other
application services products, the impact of the acquisition of our Twilio Segment business and certain
operational improvements.

2020 compared to 2019

In 2020, cost of revenue increased by $320.6 million, or 61%, compared to the same period last year.
The increase in cost of revenue was primarily attributable to a $246.2 million increase in network service
providers’ costs and a $32.3 million increase in cloud infrastructure fees, both to support the growth in
usage of our products. The increase was also due to a $14.2 million increase in the amortization expense of
intangible assets that we acquired through business combinations.

In 2020, gross margin percentage declined compared to the same period last year. This decline was

primarily driven by a re-acceleration in growth of our messaging business, an increase in amortization
expense related to acquired intangible assets, the impact of an increasing mix of international product
usage and an increase in network service provider fees in certain geographies, which we pass to our
customers at cost. These declines were partially offset by the impact of the acquisition of our Twilio
Segment business and certain operational improvements.

Operating Expenses

Year Ended December 31,

2021

2020

2019

2020 to 2021
Change

2019 to 2020
Change

(Dollars in thousands)

Research and development . . . . . . . .
Sales and marketing . . . . . . . . . . . . . .
General and administrative . . . . . . . .

$ 789,219
1,044,618
472,460

$ 530,548
567,407
310,607

$391,355
369,079
218,268

$258,671
477,211
161,853

49% $139,193
36%
84% 198,328 54%
42%
52% 92,339

Total operating expenses . . . . . . . .

$2,306,297

$1,408,562

$978,702

$897,735

64% $429,860

44%

2021 compared to 2020

In 2021, research and development expenses increased by $258.7 million, or 49%, compared to the
same period last year. The increase was primarily attributable to a $225.0 million increase in personnel
costs, net of a $15.7 million increase in capitalized software development costs, largely as a result of a 54%
average increase in our research and development headcount, as we continued to focus on enhancing our
existing products, introducing new products as well as enhancing product management and other technical
functions. In addition, the year ended December 31, 2021 included research and development expenses
and the impact of growth in headcount from our recent acquisitions.

In 2021, sales and marketing expenses increased by $477.2 million, or 84%, compared to the same
period last year. The increase was primarily attributable to a $331.5 million increase in personnel costs,
largely as a result of a 74% average increase in sales and marketing headcount, as we continued to expand
our sales efforts globally. The increase was also due to a $43.6 million increase related to the amortization
of acquired intangible assets and a $31.6 million increase in advertising expenses. In addition, the year
ended December 31, 2021 included sales and marketing expenses and the impact of growth in headcount
from our recent acquisitions.

In 2021, general and administrative expenses increased by $161.9 million, or 52%, compared to the
same period last year. The increase was primarily attributable to a $142.1 million increase in personnel
costs, largely as a result of a 75% average increase in general and administrative headcount, to support the
growth of our business globally. The increase was also due to a $12.2 million increase in charitable
contributions that we made through Twilio.org, $11.2 million increase in professional service fees incurred

in the ordinary course of business, offset by a $14.2 million decrease in professional services related to our
acquisitions. In addition, the year ended December 31, 2021 included general and administrative expenses
and the impact of growth in headcount from our recent acquisitions.

2020 compared to 2019

In 2020, research and development expenses increased by $139.2 million, or 36%, compared to the
same period last year. The increase was primarily attributable to a $128.3 million increase in personnel
costs, net of a $17.8 million increase in capitalized software development costs, largely as a result of a 63%
average increase in our research and development headcount, as we continued to focus on enhancing our
existing products, introducing new products as well as enhancing product management and other technical
functions. The increase was also due to a $13.3 million increase in our cloud infrastructure fees related to
staging and development of our products. In addition, the year ended December 31, 2020 included
research and development expenses and headcount from our recent acquisitions.

In 2020, sales and marketing expenses increased by $198.3 million, or 54%, compared to the same
period last year. The increase was primarily attributable to a $137.4 million increase in personnel costs,
largely as a result of a 88% average increase in sales and marketing headcount, as we continued to expand
our sales efforts in the United States and abroad. The increase was also due to a $11.4 million increase
related to the amortization of acquired intangible assets and a $20.1 million increase in advertising
expenses. In addition, the year ended December 31, 2020, included sales and marketing expenses and
headcount from our recent acquisitions.

In 2020, general and administrative expenses increased by $92.3 million, or 42%, compared to the
same period last year. The increase was primarily attributable to a $25.4 million increase in personnel
costs, largely as a result of a 66% average increase in general and administrative headcount, to support the
growth of our business globally. The increase was also due to a $19.0 million increase in charitable
contributions due to several donations made by Twilio.org, a $10.7 million increase in our allowance for
estimated credit losses partially impacted by the COVID-19 environment and a $5.8 million increase in
professional expenses related to our acquisitions of other business. Additionally, certain of our taxes
increased by $7.9 million primarily in foreign jurisdictions and our professional services fees increased by
$6.6 million. In addition, the year ended December 31, 2021 included general and administrative expenses
and headcount from our recent acquisitions.

Liquidity and Capital Resources

Our principal sources of liquidity have been (i) the net proceeds of $979.0 million, $1.4 billion and

$1.8 billion, net of underwriting discounts and offering expenses paid by us, from our public equity
offerings in June 2019, August 2020 and February 2021, respectively; (ii) the aggregate net proceeds of
approximately $537.0 million, after deducting purchaser discounts and debt issuance costs paid by us, from
the issuance of our Convertible Notes in May 2018; (iii) the aggregate net proceeds of approximately
$984.7 million, after deducting purchaser discounts and debt issuance costs paid by us, from the issuance of
our 2029 Notes and 2031 Notes in March 2021; (iv) the net proceeds of $228.4 million, after deducting
transaction costs paid by us, from settlement of our capped call arrangements in June 2021; and (v) the
payments received from customers using our products.

Our primary uses of cash include operating costs, such as personnel-related costs, network service
provider costs, cloud infrastructure costs, facility-related spending, as well as acquisitions and investments.
Refer to Note 6, Note 10, Note 13(a) and Note 18 to our consolidated financial statements included
elsewhere in this Annual Report on Form 10-K for detailed discussions of our obligations and commitments
related to leases, debt, other purchase obligations and our proposed minority investment in Syniverse
Corporation.

We may, from time to time, consider acquisitions of, or investments in, complementary businesses,
products, services, capital infrastructure or technologies which might affect our liquidity requirements,

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cause us to secure additional financing or issue additional equity or debt securities. There can be no
assurance that additional credit lines or financing instruments will be available in amounts or on terms
acceptable to us, if at all.

We believe that our cash, cash equivalents and marketable securities balances, as well as the cash

flows generated by our operations, will be sufficient to satisfy our anticipated cash needs for working
capital and capital expenditures for the next 12 months and beyond. However, our belief may prove to be
incorrect, and we could utilize our available financial resources sooner than we currently expect. Our
future capital requirements and the adequacy of available funds will depend on many factors, including
those set forth in Part I, Item 1A, “Risk Factors.” We may be required to seek additional equity or debt
financing in order to meet these future capital requirements. In the event that additional financing is
required from outside sources, we may not be able to raise it on terms acceptable to us, or at all. If we are
unable to raise additional capital when desired, our business, results of operations and financial condition
would be adversely affected. Additionally, cash from operations could also be affected by various risks and
uncertainties in connection with the COVID-19 pandemic, including timing and ability to collect payments
from our customers and other risks detailed in Part I, Item 1A, “Risk Factors.”

Cash Flows

The following table summarizes our cash flows:

Year Ended December 31,

2021

2020

2019

Cash (used in) provided by operating activities . . . . . . . . . . . . . . . . .
Cash (used in) investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cash provided by financing activities . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of exchange rate changes on cash, cash equivalents and

(58,192) $

(2,489,996)
3,096,325

(In thousands)
32,654
(845,855)
1,493,311

14,048
(1,285,792)
1,020,145

restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(191)

—

Net increase (decrease) in cash, cash equivalents and restricted
cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

547,946

$ 680,150

$ (251,599)

Cash Flows from Operating Activities

In 2021, cash used in operating activities consisted primarily of our net loss of $949.9 million adjusted

for non-cash items, including $632.3 million of stock-based compensation expense, $17.2 million of tax
benefit related to release of valuation allowance in connection with our Zipwhip and prior acquisitions,
$258.4 million of depreciation and amortization expense, $5.8 million amortization of the debt discount
and issuance costs related to our long-term debt, $48.8 million of non-cash reduction to our operating
right-of-use asset, $31.5 million amortization of deferred commissions and $185.1 million of cumulative
changes in operating assets and liabilities. With respect to changes in operating assets and liabilities,
accounts receivable and prepaid expenses increased $196.0 million primarily due to revenue growth, the
timing of cash receipts and pre-payments for cloud infrastructure fees and certain operating expenses.
Accounts payable and other current liabilities increased $137.7 million primarily due to increases in
transaction volumes. Operating lease liability decreased $49.0 million due to payments made against our
operating lease obligations. Other long-term assets increased $121.2 million primarily due to an increase in
the sales commissions balances related to the growth of our business.

In 2020, cash provided by operating activities consisted primarily of our net loss of $491.0 million
adjusted for non-cash items, including $360.9 million of stock-based compensation expense, $16.5 million
of tax benefit related to release of valuation allowance in connection with our acquisitions of other
businesses, $149.7 million of depreciation and amortization expense, $23.8 million amortization of the debt
discount and issuance costs related to our long-term debt, $38.4 million of non-cash reduction to our

operating right-of-use asset, $13.3 million amortization of deferred commissions, a $13.2 million increase
in our allowance for credit losses, and $97.4 million of cumulative changes in operating assets and
liabilities. With respect to changes in operating assets and liabilities, accounts receivable and prepaid
expenses increased $92.9 million primarily due to the timing of cash receipts from certain of our larger
customers, pre-payments for cloud infrastructure fees and certain operating expenses. Accounts payable
and other current liabilities increased $98.4 million primarily due to increases in transaction volumes.
Operating lease liability decreased $33.9 million due to payments made against our operating lease
obligations. Other long-term assets increased $81.9 million primarily due to an increase in the sales
commissions balances related to the growth of our business.

Cash Flows from Investing Activities

In 2021, cash used in investing activities was $2.5 billion primarily consisting of $1.9 billion of

purchases of marketable securities and other investments, net of maturities and sales, $491.5 million of net
cash paid to acquire other businesses as described in Note 7 to our consolidated financial statements
included elsewhere in this Annual Report on Form 10-K, $44.0 million related to capitalized software
development costs and $46.0 million related to purchases of long-lived assets.

In 2020, cash used in investing activities was $845.9 million primarily consisting of $453.1 million of
purchases of marketable securities and other investments, net of maturities and sales, $333.6 million of net
cash paid to acquire other businesses as described in Note 7 to our consolidated financial statements
included elsewhere in this Annual Report on Form 10-K, $33.3 million related to capitalized software
development costs and $25.8 million related to purchases of long-lived assets.

Cash Flows from Financing Activities

In 2021, cash provided by financing activities was $3.1 billion primarily consisting of $1.8 billion in net
proceeds from our public equity offering, as described in Note 14 to our consolidated financial statements
included elsewhere in this Annual Report on Form 10-K; $984.7 million in net proceeds from the issuance
of our 2029 Notes and 2031 Notes and $228.4 million in net proceeds from the settlement of the capped
call transactions related to our Convertible Notes, which were fully redeemed during 2021, as described in
Note 10 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K;
and $136.2 million in proceeds from stock options exercised by our employees and shares issued under our
employee stock purchase plan.

In 2020, cash provided by financing activities was $1.5 billion primarily consisting of $1.4 billion in net
proceeds from our public equity offering, as described in Note 14 to our consolidated financial statements
included elsewhere in this Annual Report on Form 10-K, and $104.8 million in proceeds from stock
options exercised by our employees and shares issued under our employee stock purchase plan.

We have not entered into any off-balance sheet arrangements and do not have any holdings in

variable interest entities.

Off-Balance Sheet Arrangements

We have one business activity and operate in one reportable segment.

Segment Information

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with generally accepted accounting

principles in the United States of America. The preparation of these consolidated financial statements
requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities,

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revenue, expenses and related disclosures. We evaluate our estimates and assumptions on an ongoing
basis. Our estimates are based on historical experience and various other assumptions that we believe to be
reasonable under the circumstances. Our actual results could differ from these estimates.

We believe that the accounting policies, assumptions and estimates associated with revenue
recognition and business combinations have the greatest potential impact on our consolidated financial
statements. Therefore, we consider these to be our critical accounting policies and estimates.

See Note 2 to the consolidated financial statements included elsewhere in this Annual Report on

Form 10-K for a discussion of our accounting policies.

Revenue Recognition

Revenue is recognized upon transfer of control of promised products or services to customers in an

amount that reflects the consideration we expect to receive in exchange for those products or services. We
enter into contracts that can include various combinations of products and services, which are generally
capable of being distinct and accounted for as separate performance obligations. Revenue is recognized
net of allowances for credits and any taxes collected from customers, which are subsequently remitted to
governmental authorities.

Our revenue is primarily derived from usage-based fees earned from customers accessing our

enterprise cloud computing services. Platform access is considered a monthly series comprising one
performance obligation and usage-based fees are recognized as revenue in the period in which the usage
occurs.

Subscription-based fees are derived from certain non-usage-based contracts, such as with the sales of
short codes, customer support, and fees charged to access the cloud-based platform of our Twilio Segment
business, which acquisition is further described in Note 7 to our consolidated financial statements included
elsewhere in this Annual Report of Form 10-K. Non-usage-based contracts revenue is recognized on a
ratable basis over the contractual term which is generally from one to three years.

Our arrangements do not contain general rights of return. However, credits may be issued on a
case-by-case basis. Credits are accounted for as variable consideration, are estimated based on historical
trends and are recorded against revenue. The contracts do not provide customers with the right to take
possession of the software supporting the applications. Amounts that have been invoiced are recorded in
accounts receivable and in revenue or deferred revenue depending on whether the revenue recognition
criteria have been met.

Business Combinations

Accounting for business combinations requires us to make significant estimates and assumptions,
especially at the acquisition date with respect to tangible and intangible assets acquired and liabilities
assumed. We use our best estimates and assumptions to accurately assign fair value to the tangible and
intangible assets acquired and liabilities assumed at the acquisition date as well as the useful lives of those
acquired intangible assets. Examples of critical estimates in valuing certain of the intangible assets and
goodwill we have acquired include but are not limited to future expected cash flows from acquired
developed technologies; existing customer relationships; uncertain tax positions and tax related valuation
allowances assumed; and discount rates. Unanticipated events and circumstances may occur that may
affect the accuracy or validity of such assumptions, estimates or actual results.

Recent Accounting Pronouncements Not Yet Adopted

See Note 2(ac) to the consolidated financial statements included elsewhere in this Annual Report on

Form 10-K for a discussion of recent accounting pronouncements not yet adopted.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk

We are exposed to certain market risks in the ordinary course of our business, including sensitivities as

follows:

Interest Rate Risk

We had cash, cash equivalents and restricted cash of $1.5 billion and marketable securities of
$3.9 billion as of December 31, 2021. Cash, cash equivalents and restricted cash consist of bank deposits,
money market funds and commercial paper. Marketable securities consist primarily of U.S. treasury
securities, non-U.S. government securities and high credit quality corporate debt securities. The cash and
cash equivalents and marketable securities are held for working capital purposes. Such interest-earning
instruments carry a degree of interest rate risk. To date, fluctuations in interest income have not been
significant. The primary objective of our investment activities is to preserve principal while maximizing
income without significantly increasing risk. We do not enter into investments for trading or speculative
purposes and have not used any derivative financial instruments to manage our interest rate risk exposure.
Due to the short-term nature of our investments, we have not been exposed to, nor do we anticipate being
exposed to, material risks due to changes in interest rates. A hypothetical 10% change in interest rates
during any of the periods presented would not have had a material impact on our consolidated financial
statements.

In May 2018, we issued $550.0 million aggregate principal amount of Convertible Notes, which were

fully redeemed as of June 2, 2021.

In March 2021, we issued $1.0 billion aggregate principal amount of our 2029 Notes and 2031 Notes

carrying fixed interest rates of 3.625% and 3.875%, respectively.

Currency Exchange Risks

The functional currency of most of our foreign subsidiaries is the U.S. dollar. The local currencies of

our foreign subsidiaries are the Australian dollar, the Bermuda dollar, the Brazilian real, the British
pound, the Canadian dollar, the Colombian peso, the Czech Republic koruna, the Euro, the Hong Kong
dollar, the Indian rupee, the Japanese yen, the Mexican Peso, the Polish Zloty, the Serbian Dinar, the
Singapore dollar and the Swedish krona.

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Our subsidiaries remeasure monetary assets and liabilities at period-end exchange rates, while
non-monetary items are remeasured at historical rates. Revenue and expense accounts are remeasured at
the average exchange rate in effect during the month in which a transaction occurs. If there is a change in
foreign currency exchange rates, the conversion of our foreign subsidiaries’ financial statements into U.S.
dollars would result in a realized gain or loss which is recorded in our consolidated statements of
operations.

We enter into foreign currency derivative hedging transactions to mitigate our exposure to market

risks that may result from changes in foreign currency exchange rates. For further information, see Note
2(x) and Note 5 to our consolidated financial statements included elsewhere in this Annual Report on
Form 10-K.

A hypothetical 10% change in foreign exchange rates during any of the periods presented would not

have had a material impact on our consolidated financial statements.

Item 8.

Financial Statements and Supplementary Data

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Reports of Independent Registered Public Accounting Firm (PCAOB ID: 185) . . . . . . . . . . . . . . . . . .
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Comprehensive Loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Stockholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Page

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Report of Independent Registered Public Accounting Firm

To the Stockholders and Board of Directors
Twilio Inc.:

Opinions on the Consolidated Financial Statements and Internal Control Over Financial Reporting

We have audited the accompanying consolidated balance sheets of Twilio Inc. and subsidiaries (the

“Company”) as of December 31, 2021 and 2020, the related consolidated statements of operations,
comprehensive loss, stockholders’ equity and cash flows for each of the years in the three-year period
ended December 31, 2021, and the related notes (collectively, the “consolidated financial statements”). We
also have audited the Company’s internal control over financial reporting as of December 31, 2021, based
on criteria established in Internal Control – Integrated Framework (2013) issued by the Committee of
Sponsoring Organizations of the Treadway Commission.

In our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its
operations and its cash flows for each of the years in the three-year period ended December 31, 2021, in
conformity with U.S. generally accepted accounting principles. Also in our opinion, the Company
maintained, in all material respects, effective internal control over financial reporting as of December 31,
2021, based on criteria established in Internal Control – Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission.

The Company acquired Zipwhip, Inc. during fiscal 2021, and management excluded from its

assessment of the effectiveness of the Company’s internal control over financial reporting as of
December 31, 2021, Zipwhip, Inc.’s internal control over financial reporting associated with total assets of
$51.9 million and total revenues of $55.4 million included in the consolidated financial statements of the
Company as of and for the year ended December 31, 2021. Our audit of internal control over financial
reporting of the Company also excluded an evaluation of the internal control over financial reporting of
Zipwhip, Inc.

Basis for Opinions

The Company’s management is responsible for these consolidated financial statements, for

maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of
internal control over financial reporting, included in the accompanying Annual Report on Internal Control
Over Financial Reporting. Our responsibility is to express an opinion on the Company’s consolidated
financial statements and an opinion on the Company’s internal control over financial reporting based on
our audits. We are a public accounting firm registered with the Public Company Accounting Oversight
Board (United States) (PCAOB) and are required to be independent with respect to the Company in
accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities
and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require

that we plan and perform the audits to obtain reasonable assurance about whether the consolidated
financial statements are free of material misstatement, whether due to error or fraud, and whether
effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks

of material misstatement of the consolidated financial statements, whether due to error or fraud, and
performing procedures that respond to those risks. Such procedures included examining, on a test basis,
evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also
included evaluating the accounting principles used and significant estimates made by management, as well
as evaluating the overall presentation of the consolidated financial statements. Our audit of internal

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control over financial reporting included obtaining an understanding of internal control over financial
reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and
operating effectiveness of internal control based on the assessed risk. Our audits also included performing
such other procedures as we considered necessary in the circumstances. We believe that our audits provide
a reasonable basis for our opinions.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable

assurance regarding the reliability of financial reporting and the preparation of financial statements for
external purposes in accordance with generally accepted accounting principles. A company’s internal
control over financial reporting includes those policies and procedures that (1) pertain to the maintenance
of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the
assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to
permit preparation of financial statements in accordance with generally accepted accounting principles,
and that receipts and expenditures of the company are being made only in accordance with authorizations
of management and directors of the company; and (3) provide reasonable assurance regarding prevention
or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have
a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect
misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk
that controls may become inadequate because of changes in conditions, or that the degree of compliance
with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matters communicated below are matters arising from the current period audit of

the consolidated financial statements that were communicated or required to be communicated to the
audit committee and that: (1) relate to accounts or disclosures that are material to the consolidated
financial statements and (2) involved our especially challenging, subjective, or complex judgments. The
communication of critical audit matters does not alter in any way our opinion on the consolidated financial
statements, taken as a whole, and we are not, by communicating the critical audit matters below, providing
separate opinions on the critical audit matters or on the accounts or disclosures to which they relate.

Evaluation of the sufficiency of audit evidence over revenue recognition

As discussed in Note 2(e) to the consolidated financial statements, the Company’s revenue is derived

from usage and non-usage based fees earned from customers accessing the Company’s enterprise cloud
computing services. As of December 31, 2021, the Company recorded $2.8 billion in revenues, a portion of
which related to Programmable Messaging and Programmable Voice APIs. The Company’s revenue
recognition process is highly automated and revenue is recorded within the Company’s general ledger
through reliance on customized and proprietary information technology (IT) systems.

We identified the evaluation of the sufficiency of audit evidence over revenue recognition related to
the Company’s Programmable Messaging and Programmable Voice APIs as a critical audit matter. This
matter required especially subjective auditor judgment because of the large number of information
technology (IT) applications involved in the revenue recognition process. Auditor judgment was required
in determining the nature and extent of audit evidence obtained over these information systems that
process revenue transactions. Involvement of IT professionals with specialized skills and knowledge was
required to assist with the performance and evaluation of certain procedures and determination of IT
applications subject to testing.

The following are the primary procedures we performed to address this critical audit matter. We
applied auditor judgment to determine the nature and extent of procedures to be performed over revenue

recognition. We evaluated the design and tested the operating effectiveness of certain internal controls
related to the Company’s Programmable Messaging and Programmable Voice revenue recognition
process. We involved IT professionals with specialized skills and knowledge, who assisted in testing
controls related to the Company’s general information technology and application controls related to the
systems utilized within the Company’s Programmable Messaging and Programmable Voice revenue
recognition process. For a sample of customer agreements, we tested the Company’s identification and
treatment of significant contract terms, including comparing the pricing reflected in the Company’s
revenue IT system to the contractually agreed upon pricing with the customer. For a sample of revenue
transactions, we compared the amounts recognized for consistency with underlying documentation,
including contracts with customers. We assessed the recorded revenue by comparing revenue to underlying
cash receipts. We evaluated credits issued after year end to assess the revenue recorded within the period.
In addition, we evaluated the overall sufficiency of audit evidence obtained by assessing the results of
procedures performed, including appropriateness of the nature and extent of such evidence.

Valuation of the acquisition date intangible assets related to a business combination

As discussed in Note 7 to the consolidated financial statements, on July 14, 2021, the Company

acquired Zipwhip, Inc. (Zipwhip) by issuing shares of its Class A common stock worth approximately
$419.2 million and paying approximately $418.1 million of cash. As part of the acquisition, the Company
acquired $244.5 million of intangible assets, including customer relationships.

We identified the assessment of the valuation of the acquisition date customer relationship intangible

asset acquired as a critical audit matter. There was a high degree of subjective auditor judgment in
assessing the discount rate and forecasted revenue growth rates used to derive the fair value of the
customer relationship acquired intangible asset. In addition, this fair value was challenging to test due to
the sensitivity of the fair value determination to changes in these assumptions.

The following are the primary procedures we performed to address the critical audit matter. We
evaluated the design and tested the operating effectiveness of certain internal controls over the Company’s
process to value acquired intangible assets, including the Company’s controls over the discount rate and
forecasted revenue growth rate. We compared prior period forecasted revenue to prior period actual
revenue to evaluate the Company’s ability to forecast. We evaluated the Company’s forecasted revenue
growth rates used to value the customer relationship intangible asset by (1) comparing the growth forecast
assumptions to historical growth rates of peer companies, and (2) comparing forecasted growth rates to
historical growth rates. We involved a valuation professional with specialized skills and knowledge, who
assisted in testing by:

• evaluating the discount rate used by the Company to value the customer relationship intangible

asset by assessing the relevant inputs used by the Company in their calculation of their discount rate

• recalculating the estimate of the fair value of the customer relationship intangible asset acquired
using the Company’s cash flow forecast and discount rate independently corroborated by our
valuation specialists and comparing the result to the Company’s fair value estimate.

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/s/ KPMG LLP

We have served as the Company’s auditor since 2013.

Santa Clara, California
February 22, 2022

TWILIO INC.
Consolidated Balance Sheets

As of December 31,

2021

2020

(In thousands, except share and per share amounts)

ASSETS
Current assets:

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Short-term marketable securities . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . .

Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating right-of-use assets . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill
Other long-term assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,479,452
3,878,430
388,215
186,131

5,932,228
255,316
234,584
1,050,012
5,263,166
263,292

Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

12,998,598

LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:

Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses and other current liabilities . . . . . . . . . . .
Deferred revenue and customer deposits . . . . . . . . . . . . . . .
Operating lease liability, current . . . . . . . . . . . . . . . . . . . . . . .

Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease liability, noncurrent . . . . . . . . . . . . . . . . . . .
Finance lease liability, noncurrent . . . . . . . . . . . . . . . . . . . . .
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . .

93,333
417,503
140,389
52,325

703,550
211,253
25,132
985,907
41,290

933,885
2,105,906
251,167
81,377

3,372,335
183,239
258,610
966,573
4,595,394
111,282

9,487,433

60,042
252,895
87,031
48,338

448,306
229,905
17,856
302,068
36,633

Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,967,132

1,034,768

Commitments and contingencies (Note 13)
Stockholders’ equity:

Preferred stock, $0.001 par value, 100,000,000 shares

authorized, none issued . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Class A and Class B common stock, $0.001 par value per

share
Authorized shares 1,100,000,000 as of December 31,

2021 and 2020;

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Issued and outstanding shares 180,468,099 and

164,047,524 as of . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
December 31, 2021 and 2020 . . . . . . . . . . . . . . . . . . . . . . .
Additional paid-in capital
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accumulated other comprehensive (loss) income . . . . . . . .
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . .

—

180
13,169,118
(18,141)
(2,119,691)

11,031,466

164
9,613,246
9,046
(1,169,791)

8,452,665

9,487,433

Total liabilities and stockholders’ equity . . . . . . . . . . . . . .

12,998,598

See accompanying notes to consolidated financial statements.

TWILIO INC.
Consolidated Statements of Operations

Year Ended December 31,

2021

2020

2019

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Cost of revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(In thousands, except share and per share amounts)
2,841,839
1,451,126

1,761,776
846,115

1,134,468
525,551

Gross profit

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,390,713

915,661

608,917

Operating expenses:

Research and development
. . . . . . . . . . . . . . . . . . . . .
Sales and marketing . . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . . .

Total operating expenses . . . . . . . . . . . . . . . . . . .

Loss from operations . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . .

Other (expenses) income, net

Loss before benefit for income taxes . . . . . . . . . . . . . .
Benefit for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . .

789,219
1,044,618
472,460

2,306,297

(915,584)
(45,345)

(960,929)
11,029

530,548
567,407
310,607

1,408,562

(492,901)
(11,525)

(504,426)
13,447

391,355
369,079
218,268

978,702

(369,785)
7,569

(362,216)
55,153

Net loss attributable to common stockholders . . . . . .

(949,900) $

(490,979) $

(307,063)

Net loss per share attributable to common

stockholders, basic and diluted . . . . . . . . . . . . . . . . .

(5.45) $

(3.35) $

(2.36)

Weighted-average shares used in computing
net loss per share attributable to common
stockholders, basic and diluted . . . . . . . . . . .

174,180,465

146,708,663

130,083,046

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See accompanying notes to consolidated financial statements.

TWILIO INC.
Consolidated Statements of Comprehensive Loss

Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other comprehensive (loss) income:

Unrealized (loss) gain on marketable securities . . . . . . . . . . . . . . . . . .
Foreign currency translation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net change in market value of effective foreign currency forward

exchange contracts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

294

—

Total other comprehensive (loss) income . . . . . . . . . . . . . . . . . . . . .

(27,187)

3,960

Year Ended December 31,

2021

2020

2019

(In thousands)
$(949,900) $(490,979) $(307,063)

(27,215)
(266)

3,674
286

3,804
—

—

3,804

Comprehensive loss attributable to common stockholders . . . . .

$(977,087) $(487,019) $(303,259)

See accompanying notes to consolidated financial statements.

TWILIO, INC.
Consolidated Statements of Stockholder’s Equity

Common Stock
Class A

Common Stock
Class B

Amount

Additional
Paid-In
Capital

Accumulated
Other
Comprehensive
Income

Accumulated
Deficit

Total
Stockholders’
Equity

Balance as of December 31, 2018 . . . . . . . . 80,769,763 $ 80

19,310,465

(In thousands, except share amounts)
$ 1,282

808,527

$20

Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercises of stock options . . . . . . . . . . . . . .
Recapitalization of a subsidiary . . . . . . . . . .
Vesting of restricted stock units . . . . . . . . .
Value of equity awards withheld for tax

liability . . . . . . . . . . . . . . . . . . . . . . . . . . . .

— —
1
— —
2

1,466,813

2,775,788

— —
2
— —
1

2,154,053

117,331

—
37,760
75
—

(23,543) —

(22,095) —

(5,412)

Conversion of shares of Class B common
stock into shares of Class A common
stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10,029,127

Shares of Class A common stock issued

9 (10,029,127)

(9)

—

under ESPP . . . . . . . . . . . . . . . . . . . . . . . .

244,628 —

— —

19,738

Shares of Class A common stock issued in

connection with a follow-on public
offering, net of underwriters’ discounts
and issuance costs . . . . . . . . . . . . . . . . . . .

Shares of Class A common stock issued in

8,064,515

acquisition . . . . . . . . . . . . . . . . . . . . . . . . . 23,555,081

Value of equity awards assumed in

— —

979,039

— —

2,658,874

acquisition . . . . . . . . . . . . . . . . . . . . . . . . .

— —

182,554

—
—
—
—

—

Unrealized gain on marketable

securities . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . .

— —
— —

—
271,844

3,804
—

$ (371,674) $

438,235

(307,063)
—
(75)
—

—

(307,063)
37,763
—
3

(5,412)

—

19,738

979,047

— 2,658,898

—

—
—

182,554

3,804
271,844

Balance as of December 31, 2019 . . . . . . . . 126,882,172 $124

11,530,627

$14

$ 4,952,999

$ 5,086

$ (678,812) $ 4,279,411

Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercises of stock options . . . . . . . . . . . . . .
Vesting of restricted stock units . . . . . . . . .
Value of equity awards withheld for tax

liability . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Conversion of shares of Class B common
stock into shares of Class A common
stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity component from partial settlement
of convertible senior notes due 2023 . . . .

Shares of Class A common stock issued

under ESPP . . . . . . . . . . . . . . . . . . . . . . . .

Shares of Class A common stock donated

to charity . . . . . . . . . . . . . . . . . . . . . . . . . .

Issuance of shares of Class A common
stock in connection with a follow-on
public offering, net of underwriters’
discounts and issuance costs . . . . . . . . . .

Shares of Class A common stock issued in

— —
2
4

2,263,629
3,525,401

1,232,099

— —
1
29,007 —

—
72,514
—

(34,893) —

(4,692) —

(8,778)

2,235,739

2,902,434

291,800

88,408 —

(2,235,739)

(2)

—

— —

190,757

— —

32,242

18,993

5,819,838

— —

1,408,163

— —

2,532,347

acquisition . . . . . . . . . . . . . . . . . . . . . . . . .

9,263,140

Value of equity awards assumed in

acquisition . . . . . . . . . . . . . . . . . . . . . . . . .

Shares of Class A common stock issued in

— —

38,972

acquisition subject to future vesting . . . .

258,554 —

Unrealized gain on marketable

securities . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . .

— —
— —
— —

— —

— —
— —
— —

—

—
—
375,037

—
—
—

—

3,674
286
—

(490,979)
—
—

(490,979)
72,517
4

—

(8,778)

—

190,760

32,243

18,993

— 1,408,169

— 2,532,356

—

—
—
—

38,972

—

3,674
286
375,037

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Balance as of December 31, 2020 . . . . . . . . 153,496,222 $151

10,551,302

$13

$ 9,613,246

$ 9,046

$(1,169,791) $ 8,452,665

Common Stock
Class A

Common Stock
Class B

Amount

Additional
Paid-In
Capital

Accumulated
Other
Comprehensive
Income

Accumulated
Deficit

Total
Stockholders’
Equity

Balance as of December 31, 2020 . . . . . . . . 153,496,222 $151

10,551,302

(In thousands, except share amounts)
$ 9,046
$ 9,613,246

$13

liability . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Conversion of shares of Class B common
stock into shares of Class A common
stock . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Equity component from partial settlement
and redemption of convertible senior
notes due 2023 . . . . . . . . . . . . . . . . . . . . . .

Settlement of capped call, net of related

costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Shares of Class A common stock issued

under ESPP . . . . . . . . . . . . . . . . . . . . . . . .

Shares of Class A common stock donated

to charity . . . . . . . . . . . . . . . . . . . . . . . . . .

Issuance of shares of Class A common
stock in connection with a follow-on
public offering, net of underwriters’
discounts and issuance costs . . . . . . . . . .

Shares of Class A common stock issued in

Value of equity awards assumed in

acquisition . . . . . . . . . . . . . . . . . . . . . . . . .
Shares of Class A common stock subject to
future vesting . . . . . . . . . . . . . . . . . . . . . . .

Unrealized loss on marketable

securities . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign currency translation . . . . . . . . . . . .
Net change in market value of effective
foreign currency forward exchange
contracts . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . .

acquisition . . . . . . . . . . . . . . . . . . . . . . . . .

1,116,816

— —
2
4

1,779,320
3,515,913

— —
509,499 —
— —

—
87,693
(4)

(32,002) —

— —

(10,388)

1,218,696

4,846,965

(1,218,696)

(1)

—

— —

335,637

— —

225,233

198,926 —

88,408 —

— —

48,465

31,169

4,312,500

— —

1,765,709

— —

419,169

— —

1,511

84,230 —

— —
— —

— —

— —
— —

—

—
—

— —
— —

—
651,678

294
—

—
—
—

—

(27,215)
(266)

$(1,169,791) $ 8,452,665

(949,900)
—
—

—

(949,900)
87,695
—

(10,388)

—

335,642

225,233

48,465

31,169

— 1,765,713

—

—
—

419,170

1,511

—

(27,215)
(266)

294
651,678

Balance as of December 31, 2021 . . . . . . . . 170,625,994 $168

9,842,105

$12

$13,169,118

$(18,141)

$(2,119,691) $11,031,466

See accompanying notes to consolidated financial statements.

TWILIO INC.
Consolidated Statements of Cash Flows

CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Adjustments to reconcile net loss to net cash (used in) provided by operating activities:

Depreciation and amortization . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Non-cash reduction to the right-of-use asset
Net amortization of investment premium and discount
. . . . . . . . . . . . . . . . . . . . . . . . . . . .
Impairment of operating right-of-use assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of debt discount and issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Amortization of deferred commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Tax benefit related to release of valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Value of shares of Class A common stock donated to charity . . . . . . . . . . . . . . . . . . . . . . .
Loss on extinguishment of debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Changes in operating assets and liabilities:

Accounts receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued expenses and other current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue and customer deposits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other long-term liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash (used in) provided by operating activities . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year Ended December 31,

2021

2020

2019

(In thousands)

$ (949,900) $ (490,979) $ (307,063)

258,378
48,786
36,158
8,854
5,827
632,285
31,541
(17,236)
31,169
28,965
12,094

(117,943)
(78,012)
(121,225)
10,191
127,554
45,634
(49,046)
(2,266)
(58,192)

149,660
38,395
6,789
—
23,759
360,936
13,322
(16,459)
18,993
12,863
12,762

(81,303)
(11,636)
(81,908)
10,060
88,340
13,824
(33,938)
(826)
32,654

110,430
23,193
(4,501)
—
23,696
264,318
4,511
(55,745)
—
—
3,165

(51,357)
(20,316)
(18,021)
17,255
46,154
2,968
(21,138)
(3,501)
14,048

CASH FLOWS FROM INVESTING ACTIVITIES:

Acquisitions, net of cash acquired and other related payments . . . . . . . . . . . . . . . . . . . . . .
Purchases of marketable securities and other investments . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from sales and maturities of marketable securities . . . . . . . . . . . . . . . . . . . . . . . .
Capitalized software development costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Purchases of long-lived and intangible assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash used in investing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(491,522)
(3,523,232)
1,614,779
(43,973)
(46,048)
(2,489,996)

(333,591)
(1,636,590)
1,183,459
(33,328)
(25,805)
(845,855)

122,749
(2,038,422)
697,171
(21,922)
(45,368)
(1,285,792)

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from public offerings, net of underwriters’ discount and issuance costs . . . . . . .
Proceeds from issuance of senior notes due 2029 and 2031 . . . . . . . . . . . . . . . . . . . . . . . . .
Payment of debt issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Principal payments on debt and finance leases . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from exercises of stock options and shares of Class A common stock issued

under ESPP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from settlements of capped call, net of settlement costs . . . . . . . . . . . . . . . . . . . .
Value of equity awards withheld for tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net cash provided by financing activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Effect of exchange rate changes on cash, cash equivalents and restricted cash . . . . . . . . . . .
NET INCREASE (DECREASE) IN CASH, CASH EQUIVALENTS AND

RESTRICTED CASH . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
CASH, CASH EQUIVALENTS AND RESTRICTED CASH—Beginning of year . . . . . .
CASH, CASH EQUIVALENTS AND RESTRICTED CASH —End of year . . . . . . . . . . .

1,765,713
987,500
(2,777)
(8,295)

136,160
228,412
(10,388)
3,096,325
(191)

547,946
933,885
$ 1,481,831

Cash paid for income taxes, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cash paid for interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

NON-CASH INVESTING AND FINANCING ACTIVITIES:

Purchases of property and equipment through finance leases . . . . . . . . . . . . . . . . . . . . . . .

Value of common stock issued and equity awards assumed in acquisition . . . . . . . . . . . . .

6,147

20,637

22,157

1,408,113
—
—
(10,784)

104,760
—
(8,778)
1,493,311
40

680,150
253,735
933,885

3,092

2,139

20,108

979,123
—
—
(11,046)

57,480
—
(5,412)
1,020,145
—

(251,599)
505,334
253,735

1,368

2,290

5,848

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420,681

$ 2,571,328

$ 2,841,452

Value of common stock issued to settle convertible senior notes due 2023 . . . . . . . . . . . .

$ 1,704,969

892,640

—

RECONCILIATION OF CASH, CASH EQUIVALENTS AND RESTRICTED CASH

TO THE CONSOLIDATED BALANCE SHEETS
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted cash in other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Restricted cash in other long-term assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Total cash, cash equivalents and restricted cash . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 1,479,452
1,536
843
$ 1,481,831

933,885
—
—
933,885

253,735
—
—
253,735

See accompanying notes to consolidated financial statements.

TWILIO INC.

Notes to Consolidated Financial Statements

1. Organization and Description of Business

Twilio Inc. (the “Company”) was incorporated in the state of Delaware on March 13, 2008. The
Company is the leading cloud communications platform and enables developers to build, scale and operate
real-time customer engagement within their software applications via simple-to-use Application
Programming Interfaces (“API”). The power, flexibility, and reliability offered by the Company’s software
building blocks empower entities of virtually every shape and size to build world-class engagement into
their customer experience.

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 consolidated financial statements have been prepared in accordance with generally

accepted accounting principles in the United States of America (“U.S. GAAP”).

(b) Principles of Consolidation

The consolidated financial statements include the Company and its wholly owned subsidiaries. All

significant intercompany balances and transactions have been eliminated.

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;
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 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) 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, restricted cash, cash equivalents and marketable securities with financial
institutions that management believes are financially sound and have minimal credit risk exposure
although the balances will 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. The Company does not require collateral from its credit customers and maintains

TWILIO INC.

Notes to Consolidated Financial Statements (Continued)

2. Summary of Significant Accounting Policies (Continued)

reserves for estimated credit losses on customer accounts when considered necessary. Actual credit losses
may differ from the Company’s estimates. During the years ended December 31, 2021, 2020 and 2019, no
customer organization accounted for more than 10% of the Company’s total revenue.

As of December 31, 2021 and 2020, no customer organization represented more than 10% of the

Company’s gross accounts receivable.

(e) Revenue Recognition

Revenue is recognized upon transfer of control of promised products or services to customers in an
amount that reflects the consideration the Company expects to receive in exchange for those products or
services. The Company enters into contracts that can include various combinations of products and
services, which are generally capable of being distinct and accounted for as separate performance
obligations. Revenue is recognized net of allowances for credits and any taxes collected from customers,
which are subsequently remitted to governmental authorities.

The Company determines revenue recognition through the following steps:

• Identification of the contract, or contracts, with a customer;

• Identification of the performance obligations in the contract;

• Determination of the transaction price;

• Allocation of the transaction price to the performance obligations in the contract; and,

• Recognition of revenue when, or as, the Company satisfies a performance obligation.

Nature of Products and Services

The Company’s revenue is primarily derived from usage-based fees earned from customers accessing

the Company’s enterprise cloud computing services. Platform access is considered a monthly series
comprising of one performance obligation and usage-based fees are recognized as revenue in the period in
which the usage occurs. In the years ended December 31, 2021, 2020 and 2019, the revenue from usage-
based fees represented 72%, 76% and 75% of total revenue, respectively.

Subscription-based fees are derived from certain non-usage-based contracts, such as those for the
sales of short codes, customer support and fees charged to access the cloud-based platform of Segment io,
Inc. (“Segment”), which the Company acquired in 2020 as further described in Note 7. Non-usage-based
contracts revenue is recognized on a ratable basis over the contractual term which is generally between one
to three years. In the years ended December 31, 2021, 2020 and 2019, the revenue from non-usage-based
fees represented 28%, 24%, and 25% of total revenue, respectively.

No significant judgments are required in determining whether products and services are considered
distinct performance obligations and should be accounted for separately versus together, or to determine
the stand-alone selling price (“SSP”).

The Company’s arrangements do not contain general rights of return. However, credits may be issued

on a case-by-case basis. The contracts do not provide customers with the right to take possession of the
software supporting the applications. Amounts that have been invoiced are recorded in accounts
receivable and in revenue or deferred revenue depending on whether the revenue recognition criteria have
been met.

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TWILIO INC.

Notes to Consolidated Financial Statements (Continued)

2. Summary of Significant Accounting Policies (Continued)

Remaining Performance Obligations

Revenue allocated to remaining performance obligations represents unearned revenue and amounts
that were and will be invoiced and recognized as revenue in future periods for non-cancelable multi-year
subscription arrangements. The Company applies the optional exemption of not disclosing the transaction
price allocated to the remaining performance obligations for its usage-based contracts and contracts with
original duration of one year or less. Revenue allocated to remaining performance obligations for
contracts with durations of more than one year was $154.2 million as of December 31, 2021, of which 62%
is expected to be recognized over the next 12 months and 92% is expected to be recognized over the next
24 months.

(f) Deferred Revenue and Customer Deposits

Deferred revenue is recorded when a non-cancellable contractual right to bill exists or when cash
payments are received in advance of future usage on non-cancelable contracts. Customer refundable
prepayments are recorded as customer deposits. As of December 31, 2021 and 2020, the Company
recorded $141.5 million and $87.2 million as its deferred revenue and customer deposits, respectively, that
are included in deferred revenue and customer deposits and other long-term liabilities in the
accompanying consolidated balance sheets. During the years ended December 31, 2021, 2020 and 2019, the
Company recognized $70.1 million, $19.5 million and $18.7 million of revenue, respectively, that was
included in the deferred revenue and customer deposits balance as of the end of the previous year.

(g) Deferred Sales Commissions

The Company records an asset for the incremental costs of obtaining a contract with a customer, for
example, sales commissions that are earned upon execution of contracts. The Company uses the portfolio
of data method to determine the estimated period of benefit of capitalized commissions which is generally
determined to be up to five years. Amortization expense related to these capitalized costs related to initial
contracts, upsells and renewals, is recognized on a straight line basis over the estimated period of benefit of
the capitalized commissions. The Company applies the optional exemption of expensing these costs as
incurred with amortization periods of one year or less.

Total net capitalized costs as of December 31, 2021 and 2020, were $193.4 million and $85.6 million,
respectively, and are included in prepaid expenses and other current assets and other long-term assets in
the accompanying consolidated balance sheets. Amortization of these assets was $31.5 million,
$13.3 million and $4.5 million in the years ended December 31, 2021, 2020 and 2019, respectively, and is
included in sales and marketing expense in the accompanying consolidated statements of operations.

(h) Cost of Revenue

Cost of revenue consists primarily of costs of communications services purchased from network
service providers. Cost of revenue also includes fees to support the Company’s cloud infrastructure, direct
costs of personnel, such as salaries and stock-based compensation for the customer care and support
services employees, and non-personnel costs, such as amortization of capitalized internal-use software
development costs and amortization of acquired intangibles.

(i) Research and Development Expense

Research and development expenses consist primarily of personnel costs, cloud infrastructure fees for

staging and development, outsourced engineering services, amortization of capitalized internal-use

TWILIO INC.

Notes to Consolidated Financial Statements (Continued)

2. Summary of Significant Accounting Policies (Continued)

software development costs and an allocation of general overhead expenses. The Company capitalizes the
portion of its software development costs that meets the criteria for capitalization.

(j) Internal-Use Software Development Costs

Certain costs of platform and other software applications developed for internal use are capitalized.
The Company capitalizes qualifying internal-use software development costs that are incurred during the
application development stage. Capitalization of costs begins when two criteria are met: (i) the preliminary
project stage is completed and (ii) it is probable that the software will be completed and used for its
intended function. Capitalization ceases when the software is substantially complete and ready for its
intended use, including the completion of all significant testing. The Company also capitalizes costs related
to specific upgrades and enhancements when it is probable the expenditures will result in additional
functionality. Costs incurred for maintenance, minor upgrades and enhancements are expensed. Costs
related to preliminary project activities and post-implementation operating activities are also expensed as
incurred.

Capitalized costs of platform and other software applications are included in property and equipment.

These costs are amortized over the estimated useful life of the software on a straight-line basis over three
years. Management evaluates the useful life of these assets on an annual basis and tests for impairment
whenever events or changes in circumstances occur that could impact the recoverability of these assets.
The amortization of costs related to the platform applications is included in cost of revenue, while the
amortization of costs related to other software applications developed for internal use is included in
operating expenses.

(k) Advertising Costs

Advertising costs are expensed as incurred and were $78.8 million, $47.2 million and $27.0 million in

the years ended December 31, 2021, 2020 and 2019, respectively. Advertising costs are included in sales
and marketing expenses in the accompanying consolidated statements of operations.

(l) Stock-Based Compensation

All stock-based compensation to employees, including the purchase rights issued under the

Company’s 2016 Employee Stock Purchase Plan (the “ESPP”), is measured on the grant date based on the
fair value of the awards on the date of grant. These costs are recognized as an expense following straight-
line attribution method over the requisite service period. The Company uses the Black-Scholes option
pricing model to measure the fair value of its stock options and the purchase rights issued under the ESPP.
The fair value of the restricted stock units is determined using the fair value of the Company’s Class A
common stock on the date of grant and recognized as an expense following straight-line attribution
method over the requisite service period. Forfeitures are recorded in the period in which they occur.

Compensation expense for stock options granted to nonemployees is calculated using the Black-

Scholes option pricing model and is recognized in expense over the service period.

The Black-Scholes option pricing model requires the use of complex assumptions, which determine

the fair value of stock options and the purchase rights issued under ESPP. These assumptions include:

• Fair value of the common stock. The Company uses the market closing price of its Class A common

stock, as reported on the New York Stock Exchange, for the fair value.

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TWILIO INC.

Notes to Consolidated Financial Statements (Continued)

2. Summary of Significant Accounting Policies (Continued)

• Expected term. The expected term represents the period that the stock option or the purchase right
is expected to be outstanding. The Company uses the simplified calculation of expected term, which
reflects the weighted-average time-to-vest and the contractual life of the stock option or the
purchase right;

• Expected volatility. Prior to July 1, 2021, the expected volatility was derived from an average of the
historical volatilities of the Class A common stock of the Company and several other entities with
characteristics similar to those of the Company, such as the size and operational and economic
similarities to the Company’s principal business operations. Beginning with the third quarter 2021,
the expected volatility was derived from the average of the historical volatilities of the Class A
common stock of the Company.

• Risk -free interest rate. The risk-free interest rate is based on the U.S. Treasury yield curve in effect

at the time of grant for zero coupon U.S. Treasury notes with maturities approximately equal to the
expected term of the stock-based awards; and

• Expected dividend. The expected dividend is assumed to be zero as the Company has never paid

dividends and has no current plans to pay any dividends on its common stock.

If any of the assumptions used in the Black-Scholes model changes, stock-based compensation for

future options may differ materially compared to that associated with previous grants.

Income Taxes

The Company accounts for income taxes in accordance with authoritative guidance which requires the

use of the asset and liability approach. Deferred tax assets and liabilities are recognized for future tax
consequences attributable to temporary differences between the financial statement carrying amounts of
existing assets and liabilities and their respective tax bases, as well as net operating loss and tax credit
carry-forwards. Deferred tax amounts are determined by using the enacted tax rates expected to be in
effect when the temporary differences are expected to be recovered or settled. The effect on deferred tax
assets and liabilities of a change in tax rates is recognized in income in the period that includes the
enactment date. A valuation allowance reduces the deferred tax assets to the amount that is more likely
than not to be realized.

The Company recognizes the effect of uncertain income tax positions only if those positions are more

likely than not of being sustained. Recognized income tax positions are measured at the largest amount
that is greater than 50% likely of being realized. Changes in recognition or measurement are reflected in
the period in which the change in judgment occurs.

The Company records interest and penalties related to uncertain tax positions in the provision for

income taxes in the consolidated statements of operations.

(m) Foreign Currency Translation

The functional currency of the Company’s foreign subsidiaries is generally the U.S. dollar.

Accordingly, the subsidiaries remeasure monetary assets and liabilities at period-end exchange rates, while
non-monetary items are remeasured at historical rates. Revenue and expense accounts are remeasured at
the average exchange rate in effect during the year. Remeasurement adjustments are recognized in the
consolidated statements of operations as other income or expense in the year of occurrence. Foreign
currency transaction gains and losses were insignificant for all periods presented.

TWILIO INC.

Notes to Consolidated Financial Statements (Continued)

2. Summary of Significant Accounting Policies (Continued)

For those entities where the functional currency is a foreign currency, adjustments resulting from

translating the financial statements into U.S. dollars are recorded as a component of accumulated other
comprehensive (loss) income in stockholders’ equity. Monetary assets and liabilities denominated in a
foreign currency are translated into U.S. dollars at the exchange rate on the balance sheet date. Revenue
and expenses are translated at the weighted average exchange rates during the period. Equity transactions
are translated using historical exchange rates. Foreign currency transaction gains and losses are included in
other (expenses) income, net in the consolidated statements of operations.

(n) Comprehensive Loss

Comprehensive loss refers to net loss and other revenue, expenses, gains and losses that, under
generally accepted accounting principles, are recorded as an element of stockholders’ equity but are
excluded from the calculation of net loss.

(o) Net Loss Per Share Attributable to Common Stockholders

The Company calculates its basic and diluted net loss per share attributable to common stockholders

in conformity with the two-class method required for companies with participating securities. The
Company has 100,000,000 shares of preferred stock that was authorized but never issued or outstanding.

Class A and Class B common stock are the only outstanding equity of the Company. The rights of the
holders of Class A and Class B common stock are identical, except with respect to voting and conversion.
Each share of Class A common stock is entitled to one vote per share and each share of Class B common
stock is entitled to 10 votes per share. Shares of Class B common stock may be converted into Class A
common stock at any time at the option of the stockholder on a one-for-one basis, and are automatically
converted into Class A common stock upon sale or transfer, subject to certain limited exceptions. Shares of
Class A common stock are not convertible.

The Company also has dilutive securities, such as potential or restricted common shares or common

stock equivalents, that were excluded from the calculation of diluted net loss per share attributable to
common stockholders as their effect is antidilutive. These securities are presented in Note 16 to these
consolidated financial statements.

(p) Cash and Cash Equivalents

The Company considers all highly liquid investments with an original maturity of three months or less

when purchased to be cash equivalents. Cash equivalents consist of cash deposited into money market
funds and commercial paper. All credit and debit card transactions that process as of the last day of each
month and settle within the first few days of the subsequent month are also classified as cash and cash
equivalents as of the end of the month in which they were processed.

(q) Accounts Receivable and Allowance for Doubtful Accounts

Accounts receivable are recorded net of the allowance for doubtful accounts. The allowance for

doubtful accounts is estimated based on the Company’s assessment of its ability to collect on customer
accounts receivable. The Company regularly reviews the allowance by considering certain factors such as
historical experience, credit quality, age of accounts receivable balances and other known conditions that
may affect a customer’s ability to pay. In cases where the Company is aware of circumstances that may
impair a specific customer’s ability to meet their financial obligations, a specific allowance is recorded

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TWILIO INC.

Notes to Consolidated Financial Statements (Continued)

2. Summary of Significant Accounting Policies (Continued)

against amounts due from the customer which reduces the net recognized receivable to the amount the
Company reasonably believe will be collected. The Company writes-off accounts receivable against the
allowance when a determination is made that the balance is uncollectible and collection of the receivable is
no longer being actively pursued. As of December 31, 2021 and 2020, the allowance for doubtful accounts
was not significant to the accompanying consolidated balance sheets.

(r) Costs Related to Public Offerings

Costs related to public offerings, which consist of direct incremental legal, printing and accounting
fees are deferred until the offering is completed. Upon completion of the offering, these costs are offset
against the offering proceeds within the consolidated statements of stockholders’ equity.

(s) Property and Equipment

Property and equipment, both owned and under finance leases, is stated at cost less accumulated

depreciation and amortization. Depreciation is computed using the straight-line method over the
estimated useful life of the related asset. Maintenance and repairs are charged to expenses as incurred.

The useful lives of property and equipment are as follows:

Capitalized internal-use software development costs . . . . . . . . . . . . . . .
Data center equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Office equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assets under financing lease . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3 years
2—4 years
3 years
5 years
3 years
5 years or remaining lease term
5 years or remaining lease term

(t) Leases

The Company determines if an arrangement is or contains a lease at contract inception. The

Company presents the operating leases in long-term assets and current and long-term liabilities. Finance
lease assets are included in property and equipment, net, and finance lease liabilities are presented in
current and long-term liabilities in the accompanying consolidated balance sheets.

Right-of-use (“ROU”) assets represent the Company’s right to use an underlying asset for the lease

term and lease liabilities represent the Company’s obligation to make lease payments arising from the
lease. Operating lease ROU assets and lease liabilities are measured and recognized at the lease
commencement date based on the present value of the remaining lease payments over the lease term. As
the Company’s leases do not generally provide an implicit rate, the Company uses its incremental
borrowing rate based on the information available at commencement date in determining the present
value of lease payments. The Company’s lease agreements may have lease and non-lease components,
which the Company accounts for as a single lease component. When estimating the lease term, the
Company includes options to extend or terminate the lease when it is reasonably certain such options will
be exercised. Operating lease costs are recognized in operating expenses in the accompanying consolidated
statements of operations on a straight-line basis over the lease term and variable payments are recognized
in the period they are incurred. The Company’s lease agreements do not contain any residual value
guarantees. Leases with an initial term of 12 months or less are not recorded on the balance sheet.

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Notes to Consolidated Financial Statements (Continued)

2. Summary of Significant Accounting Policies (Continued)

Within the consolidated statements of cash flows, the Company presents the lease payments made on

the operating leases as cash flows from operations and principal payments made on the finance leases as
part of financing activities.

(u) Intangible Assets

Intangible assets recorded by the Company are costs directly associated with securing legal

registration of patents and trademarks, acquiring domain names and the fair value of identifiable
intangible assets acquired in business combinations.

Intangible assets with determinable economic lives are carried at cost, less accumulated amortization.

Amortization is computed over the estimated useful life of each asset on a straight-line basis. The
Company determines the useful lives of identifiable intangible assets after considering the specific facts
and circumstances related to each intangible asset. Factors the Company considers when determining
useful lives include the contractual term of any agreement related to the asset, the historical performance
of the asset, the Company’s long-term strategy for using the asset, any laws or other local regulations which
could impact the useful life of the asset and other economic factors, including competition and specific
market conditions. Intangible assets without determinable economic lives are carried at cost, not amortized
and reviewed for impairment at least annually.

The useful lives of the intangible assets are as follows:

Developed technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Supplier relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trade names . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Order backlog . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Patents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Telecommunication licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trademarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Domain names . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

3—7 years
2—10 years
2—5 years
5 years
1 year
20 years
Indefinite
Indefinite
Indefinite

(v) Goodwill

Goodwill represents the excess of the aggregate purchase price over the fair value of net identifiable
assets acquired in a business combination. Goodwill is not amortized and is tested for impairment at least
annually or whenever events or changes in circumstances indicate that the carrying value may not be
recoverable. The Company has determined that it operates as one reporting unit and has selected
November 30 as the date to perform its annual impairment test. In the valuation of goodwill, management
must make assumptions regarding estimated future cash flows to be derived from the Company’s business.
If these estimates or their related assumptions change in the future, the Company may be required to
record impairment for these assets.

The Company has the option to first perform a qualitative assessment to determine if it is more likely
than not that the fair value of a reporting unit is less than its carrying amount. However, the Company may
elect to bypass the qualitative assessment and proceed directly to the quantitative impairment tests. The
impairment test involves comparing the fair value of the reporting unit to its carrying value, including
goodwill. A goodwill impairment will be the amount by which a reporting unit’s carrying value exceeds its
fair value. The impairment is limited to the carrying amount of goodwill.

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Notes to Consolidated Financial Statements (Continued)

2. Summary of Significant Accounting Policies (Continued)

No goodwill impairment charges have been recorded for any period presented.

(w) Derivatives and Hedging

The Company is exposed to a wide variety of risks arising from its business operations and overall
economic conditions. These risks include exposure to fluctuations in various foreign currencies against its
functional currency and can impact the value of cash receipts and payments. The Company minimizes its
exposure to these risks through management of its core business activities, specifically, the amounts,
sources and duration of its assets and liabilities, and the use of derivative financial instruments. During
2021, the Company started using foreign currency derivative forward contracts and in the future may also
use foreign currency option contacts.

Foreign currency derivative forward contracts involve fixing the exchange rate for delivery of a
specified amount of foreign currency on a specified date. These agreements are typically cash settled in
U.S. dollars for their fair value at or close to their settlement date. Foreign currency option contracts will
require the Company to pay a premium for the right to sell a specified amount of foreign currency prior to
the maturity date of the option. The Company does not enter into derivative financial instruments trading
for speculative purposes.

Derivative instruments are carried at fair value and recorded as either an asset or a liability until they

mature. Gains and losses resulting from changes in fair value of these instruments are accounted for
depending on the use of the derivative and whether it is designated and qualifies for hedge accounting. For
derivative instruments designated as cash flow hedges, gains or losses are initially recorded in other
comprehensive income (“OCI”) in the balance sheet, then reclassified into the statement of operations in
the period in which the derivative instruments mature. These realized gains and losses are recorded within
the same financial statement line item as the hedged transaction.

The Company’s foreign currency derivative contracts are classified within Level 2 of the fair value

hierarchy because the valuation inputs are based on quoted prices and market observable data of similar
instruments in active markets, such as currency spot and forward rates.

(x) Impairment of Long-Lived Assets

The Company evaluates its long-lived assets, including property, equipment and intangible assets, for

impairment whenever events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. Recoverability of assets held and used is measured by a comparison of the
carrying amount of an asset or an asset group to estimated undiscounted future net cash flows expected to
be generated by the asset or asset group. If such evaluation indicates that the carrying amount of the asset
or the asset group is not recoverable, any impairment loss would be equal to the amount the carrying value
exceeds the fair value. There were no impairments during the years ended December 31, 2021, 2020 and
2019.

(y) Business Combinations

The Company recognizes identifiable assets acquired and liabilities assumed at their acquisition date

fair values. Goodwill is measured as the excess of the consideration transferred over the fair value of assets
acquired and liabilities assumed on the acquisition date. While the Company uses its best estimates and
assumptions as part of the purchase price allocation process to accurately value assets acquired and
liabilities assumed, these estimates are inherently uncertain and subject to refinement. The authoritative

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Notes to Consolidated Financial Statements (Continued)

2. Summary of Significant Accounting Policies (Continued)

guidance allows a measurement period of up to one year from the date of acquisition to make adjustments
to the preliminary allocation of the purchase price. As a result, during the measurement period the
Company may record adjustments to the fair values of assets acquired and liabilities assumed, with the
corresponding offset to goodwill to the extent that it identifies adjustments to the preliminary purchase
price allocation. Upon conclusion of the measurement period or final determination of the values of the
assets acquired and liabilities assumed, whichever comes first, any subsequent adjustments will be recorded
to the consolidated statement of operations.

(z) Segment Information

The Company’s Chief Executive Officer is the chief operating decision maker, who reviews the
Company’s financial information presented on a consolidated basis for purposes of allocating resources
and evaluating the Company’s financial performance. Accordingly, the Company has determined that it
operates in a single reporting segment.

(aa) Fair Value of Financial Instruments

The accounting guidance for fair value provides a framework for measuring fair value, clarifies the
definition of fair value, and expands disclosures regarding fair value measurements. Fair value is defined as
the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly
transaction between market participants at the reporting date. The accounting guidance establishes a
three-tiered hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair
value as follows:

• Level 1 Inputs: Unadjusted quoted prices in active markets for identical assets or liabilities

accessible to the reporting entity at the measurement date.

• Level 2 Inputs: Other than quoted prices included in Level 1 inputs that are observable for the asset

or liability, either directly or indirectly, for substantially the full term of the asset or liability.

• Level 3 Inputs: Unobservable inputs for the asset or liability used to measure fair value to the extent
that observable inputs are not available, thereby allowing for situations in which there is little, if
any, market activity for the asset or liability at measurement date.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of

input that is significant to the fair value measurement.

The Company applies fair value accounting for all financial instruments on a recurring basis. The
Company’s financial instruments, which include cash, restricted cash, cash equivalents, accounts receivable
and accounts payable are recorded at their carrying amounts, which approximate their fair values due to
their short-term nature. Marketable securities consist of U.S. treasury securities, non-U.S government
securities, high credit quality corporate debt securities and commercial paper. All marketable securities are
considered to be available-for-sale and recorded at their estimated fair values. Unrealized gains and losses
for available-for-sale securities are recorded in other comprehensive loss. In valuing these items, the
Company uses inputs and assumptions that market participants would use to determine their fair value,
utilizing valuation techniques that maximize the use of observable inputs and minimize the use of
unobservable inputs.

The fair value of the senior notes due 2031 and 2029 (“2029 Notes” and “2031 Notes,” respectively)

and the fair value of the convertible senior notes due 2023 (the “Convertible Notes” fully redeemed in

103

TWILIO INC.

Notes to Consolidated Financial Statements (Continued)

2. Summary of Significant Accounting Policies (Continued)

2021) are determined based on their respective closing prices on the last trading day of the reporting
period and are classified as Level 2 in the fair value hierarchy.

The carrying value of the strategic investments, which consist of restricted equity securities of a

publicly held company and equity securities of privately held companies, is determined under the
measurement alternative on a non-recurring basis adjusting for observable changes in fair value. The
Company does not have a controlling interest nor can it exercise significant influence over any of these
entities.

The Company regularly reviews changes to the rating of its debt securities by rating agencies and

monitors the surrounding economic conditions to assess the risk of expected credit losses. As of
December 31, 2021, the risk of expected credit losses was not significant.

Impairments are considered to be other than temporary if they are related to deterioration in credit

risk or if it is likely that the security will be sold before the recovery of its cost basis. Realized gains and
losses and declines in value deemed to be other than temporary are determined based on the specific
identification method and are reported in other (expenses) income, net.

(bb) Recently Issued Accounting Guidance, Not yet Adopted

In October 2021, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards

Update (“ASU”) 2021-08, “Business Combinations (Topic 805): Accounting for Contract Assets and
Contract Liabilities from Contracts with Customers,” which requires that an entity recognize and measure
contract assets and contract liabilities acquired in a business combination in accordance with ASC 606,
“Revenue from Contracts with Customers”. At the acquisition date, an acquirer should account for the
related revenue contracts as if it had originated the contracts. Generally, this should result in an acquirer
recognizing and measuring the acquired contact assets and contract liabilities consistent with how they
were recognized and measured in the acquiree’s financial statements, assuming the acquirer is able to
assess and rely on how the acquiree applied ASC 606. ASU 2021-08 is effective for interim and annual
periods beginning after December 15, 2022, with early adoption permitted. The Company expects to adopt
ASU 2021-08 in the first quarter of 2022 with no material impact on the Company’s consolidated financial
statements.

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TWILIO INC.

Notes to Consolidated Financial Statements (Continued)

3. Fair Value Measurements

Financial Assets

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

Amortized
Cost or
Carrying
Value

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair Value Hierarchy as of
December 31, 2021

Level 1

Level 2

Level 3

Aggregate
Fair Value

(In thousands)

Financial Assets:
Cash and cash equivalents:

Money market funds . . . . . . . . . . . . . . . . . $ 786,548
46,076
Commercial paper . . . . . . . . . . . . . . . . . . .

$ — $
—

— $ 786,548 $
—

—

— $ — $ 786,548
46,076

46,076 —

Total included in cash and cash

equivalents . . . . . . . . . . . . . . . . . . . . .

832,624

Marketable securities:

U.S. Treasury securities . . . . . . . . . . . . . .
Non-U.S. government securities . . . . . . .
Corporate debt securities and

375,305
221,641

commercial paper . . . . . . . . . . . . . . . . . 3,300,326

Total marketable securities . . . . . . . . . 3,897,272

—

6
—

960

966

— 786,548

46,076 —

832,624

(2,561)
(1,355)

372,750
220,286

— —
— —

372,750
220,286

(15,892)

31,000 3,254,394 — 3,285,394

(19,808)

624,036 3,254,394 — 3,878,430

Total financial assets . . . . . . . . . . . . . $4,729,896

$ 966

$(19,808) $1,410,584 $3,300,470 $ — $4,711,054

Amortized
Cost or
Carrying
Value

Gross
Unrealized
Gains

Gross
Unrealized
Losses

Fair Value Hierarchy as of
December 31, 2020

Level 1

Level 2

Level 3

Aggregate
Fair Value

(In thousands)

Financial Assets:
Cash and cash equivalents:

Money market funds . . . . . . . . . . . . . . . . . $ 656,749
Commercial paper . . . . . . . . . . . . . . . . . . .
2,000

$ — $
—

— $ 656,749 $
—

—

— $ — $ 656,749
2,000

2,000 —

Total included in cash and cash

equivalents . . . . . . . . . . . . . . . . . . . . .

658,749

Marketable securities:

U.S. Treasury securities . . . . . . . . . . . . . .
Corporate debt securities and

223,247

commercial paper . . . . . . . . . . . . . . . . . 1,874,257

Total marketable securities . . . . . . . . . 2,097,504

—

389

8,149

8,538

— 656,749

2,000 —

658,749

(1)

223,635

— —

223,635

(135)

(136)

50,000 1,832,271 — 1,882,271

273,635 1,832,271 — 2,105,906

Total financial assets . . . . . . . . . . . . . $2,756,253

$8,538

(136) $ 930,384 $1,834,271 $ — $2,764,655

The Company’s primary objective when investing excess cash is preservation of capital, hence the

Company’s marketable securities primarily consist of U.S. Treasury Securities, non-U.S government
securities, high credit quality corporate debt securities and commercial paper. As the Company views its
marketable securities as available to support current operations, it has classified all available for sale
securities as short-term. As of December 31, 2021 and 2020, for fixed income securities that were in
unrealized loss positions, the Company has determined that (i) it does not have the intent to sell any of
these investments, and (ii) it is not more likely than not that it will be required to sell any of these
investments before recovery of the entire amortized cost basis. In addition, as of December 31, 2021 and
2020, the Company anticipates that it will recover the entire amortized cost basis of such fixed income
securities before maturity.

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TWILIO INC.

Notes to Consolidated Financial Statements (Continued)

3. Fair Value Measurements (Continued)

Interest earned on marketable securities was $55.7 million, $32.4 million and $20.8 million in the years

ended December 31, 2021, 2020 and 2019, respectively. The interest is recorded as other (expenses)
income, net, in the accompanying consolidated statements of operations.

The following table summarizes the contractual maturities of marketable securities:

As of December 31, 2021

As of December 31, 2020

Amortized
Cost

Aggregate
Fair Value

Amortized
Cost

Aggregate
Fair Value

(In thousands)

Financial Assets:
Less than one year . . . . . . . . . . . . . . . . . . .
One to three years . . . . . . . . . . . . . . . . . . .

$1,084,751
2,812,521

$1,085,006
2,793,424

$1,126,091
971,413

$1,128,927
976,979

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . .

$3,897,272

$3,878,430

$2,097,504

$2,105,906

Strategic Investments

As of December 31, 2021 and 2020, the Company held strategic investments with a carrying value of
$68.3 million and $9.3 million, respectively. These securities are recorded as other long-term assets in the
accompanying consolidated balance sheets. There were no impairments or other adjustments recorded in
the years ended December 31, 2021 and 2020 related to these securities.

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 December 31, 2021, the aggregate fair value of these instruments and the associated gross
unrealized losses were not significant.

The Company’s financial liabilities that are not measured at fair value on a recurring basis consist of

its 2029 Notes and 2031 Notes, respectively. The Company’s Convertible Notes were fully redeemed in
June 2021 and were no longer outstanding as of December 31, 2021. Refer to Note 10 for further details
on these financial liabilities.

As of December 31, 2021 the fair values of the 2029 Notes and 2031 Notes were $510.2 million and

$512.8 million, respectively. As of December 31, 2020, the fair value of the Convertible Notes was
$1.7 billion.

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Notes to Consolidated Financial Statements (Continued)

4. Property and Equipment

Property and equipment consisted of the following:

As of December 31,

2021

2020

(In thousands)

Capitalized internal-use software development costs . . . . . . . .
Data center equipment(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Office equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Furniture and fixtures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 198,589
77,946
85,297
58,636
15,360
10,506

$ 142,489
43,477
69,756
35,346
12,312
9,943

Total property and equipment

Less: accumulated depreciation and amortization(1)

. . . . . . . . . . . . . . . . . . . . . .
. . . . . . . .

446,334
(191,018)

313,323
(130,084)

Total property and equipment, net . . . . . . . . . . . . . . . . . . .

$ 255,316

$ 183,239

(1) Data center equipment contains $63.0 million and $40.8 million in assets held

under finance leases as of December 31, 2021 and 2020, respectively. Accumulated
depreciation and amortization contains $26.8 million and $15.0 million in
accumulated amortizations for assets held under finance leases as of December 31,
2021 and 2020, respectively.

Depreciation and amortization expense was $59.6 million, $51.1 million and $37.5 million for the years

ended December 31, 2021, 2020 and 2019, respectively.

The Company capitalized $63.1 million, $47.1 million and $29.7 million in internal-use software

development costs in the years ended December 31, 2021, 2020 and 2019, respectively.

5. Derivatives and Hedging

As of December 31, 2021, the Company had outstanding foreign currency forward contracts

designated as cash flow hedges with total sell and buy notional values of $276.2 million and $243.1 million,
respectively. The notional value represents the amount that will be purchased or sold upon maturity of the
forward contract. As of December 31, 2021, these contracts had maturities of less than 12 months.

Gains and losses associated with these foreign currency forward contracts were as follows:

Consolidated Statement of Operations
and Statement of Comprehensive Loss

Year Ended
December 31,

Gains recognized in OCI . . . . . . . . Net change in market value of

effective foreign currency forward
exchange contracts

Losses recognized in income due

to instruments maturing . . . . . . .

Cost of revenue

2021

(In thousands)

$ 294

$7,545

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

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Notes to Consolidated Financial Statements (Continued)

5. Derivatives and Hedging (Continued)

in its consolidated balance sheet. 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 December 31, 2021, the Company did not have any offsetting
arrangements.

6. Right-of-Use Assets and Lease Liabilities

The Company has entered into various operating lease agreements for office space and data centers

and finance lease agreements for data center and office equipment and furniture.

As of December 31, 2021, the Company had 31 leased properties with remaining lease terms of

0.1 years to 7.8 years, some of which include options to extend the leases for up to 5.0 years.

Operating lease costs recorded in the accompanying consolidated statements of operations were
$61.0 million and $49.3 million for the year ended December 31, 2021 and 2020, respectively. Short-term
lease, variable lease and finance lease costs were not significant.

Supplemental cash flow and other information related to operating leases was as follows:

Year Ended
December 31,

2021

2020

Operating cash flows paid for amounts included in operating lease liabilities (in

thousands) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average remaining lease term (in years) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Weighted average discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$60,085
5.5
4.5%

$46,895
6.0
4.8%

Maturities of operating lease liabilities were as follows:

Year Ended December 31,
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: imputed interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total operating lease obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Less: current obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

As of
December 31,
2021

(In thousands)
$ 63,086
57,173
50,742
37,621
34,827
54,760

298,209
(34,631)

263,578
(52,325)

Long-term operating lease obligations . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$211,253

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TWILIO INC.

Notes to Consolidated Financial Statements (Continued)

7. Business Combinations

Zipwhip, Inc.

In July 2021, the Company acquired all outstanding shares of Zipwhip, Inc. (“Zipwhip”), a leading
provider of toll-free messaging in the United States, for a purchase price, as adjusted, of $838.8 million.
The purchase price included $418.1 million of cash, $419.2 million fair value of 1.1 million shares of the
Company’s Class A common stock and $1.5 million fair value of the pre-combination services of Zipwhip
employees reflected in the unvested equity awards assumed by the Company at closing. Additionally, at
closing, the Company issued 59,533 shares of its Class A common stock which are subject to vesting over a
period of 3 years. Vesting of these shares will be recorded in the stock-based compensation expense as the
services are provided..

Part of the cash consideration paid at closing was to settle the vested equity awards of Zipwhip
employees. The Company assumed all unvested and outstanding equity awards of Zipwhip continuing
employees, as converted into its own equity awards, at the conversion ratio provided in the Agreement and
Plan of Merger and Reorganization (the “Zipwhip Merger Agreement”). This transaction also included a
$19.1 million of additional cash consideration for certain employees, which will vest as these employees
provide services in the post-acquisition period. This amount will be recorded in the operating expenses
over a period of 3 years as the services are provided.

The acquisition was accounted for as a business combination and the total purchase price of
$838.8 million was allocated to the net tangible and intangible assets and liabilities based on their fair
values on the acquisition date with the excess recorded as goodwill. These estimates were derived from
information currently available. The determination of the fair values and estimated lives of depreciable
tangible and identifiable intangible assets requires significant judgment. As of December 31, 2021, the
areas that are not yet finalized include contingencies and income and other taxes.

The fair value of the 1.2 million aggregate number of shares of the Company’s Class A common stock

issued at closing was determined based on the closing market price of the Company’s Class A common
stock on the acquisition date. The fair value of the $30.7 million unvested equity awards assumed on the
acquisition closing date was determined (a) for options, by using the Black-Scholes option pricing model
with the applicable assumptions as of the acquisition date; (b) for restricted stock units, by using the
closing market price of the Company’s Class A common stock on the acquisition date. These awards will
continue to vest as Zipwhip employees continue to provide services in the post-acquisition period. The fair
value of these awards will be recorded into the stock-based compensation expense over the respective
vesting period of each award.

The purchase price components, as adjusted, are summarized in the following table:

Fair value of Class A common stock transferred . . . . . . . . . . . . . . . . . . . . .
Cash consideration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Fair value of the pre-combination service through equity awards . . . . . . .

Total

(In thousands)
$419,197
418,073
1,511

Total purchase price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$838,781

109

TWILIO INC.

Notes to Consolidated Financial Statements (Continued)

7. Business Combinations (Continued)

The following table presents the purchase price allocation, as adjusted, recorded in the Company’s

consolidated balance sheet as of December 31, 2021:

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable and other current assets . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating right-of-use asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease liability, noncurrent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total

(In thousands)
$ 21,610
11,481
2,950
23,545
244,500
370
600,403
(20,239)
(4,526)
(23,169)
(18,144)

Total purchase price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$838,781

(1)

Identifiable intangible assets are comprised of the following:

Developed technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Customer relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Supplier relationships . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trade names . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total

(In thousands)
$ 56,800
147,700
39,600
400

Estimated
life

(In years)
7
10
5
5

Total intangible assets acquired . . . . . . . . . . . . . . . . . . . . . .

$244,500

Goodwill generated from this acquisition primarily represents the value that is expected from the
increased scale and synergies as a result of the integration of both businesses. Goodwill is not deductible
for tax purposes.

The estimated fair value of the intangible assets acquired was determined by the Company. The
Company engaged a third-party expert to assist with the valuation analysis. The Company used a relief-
from-royalty method to estimate the fair values of the developed technology and trade names, a multi-
period excess earnings method to estimate the fair values of customer relationships and a with-and-without
method to estimate the fair value of the supplier relationships.

Most of the net tangible assets were valued at their respective carrying amounts as of the acquisition

date as the Company believes that these amounts approximate their current fair values, except for
operating right-of-use assets. The value of the acquired operating right-of-use assets was reduced to its
respective fair value on the acquisition date.

The acquired entity’s results of operations were included in the Company’s consolidated financial
statements from the date of acquisition, July 14, 2021. For the year ended December 31, 2021, Zipwhip
contributed net operating revenue of $55.4 million, which is reflected in the accompanying consolidated
statement of operations. Due to the integrated nature of the Company’s operations, the Company believes

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Notes to Consolidated Financial Statements (Continued)

7. Business Combinations (Continued)

that it is not practicable to separately identify earnings of Zipwhip on a stand-alone basis. Pro forma results
of operations for this acquisition are not presented as the financial impact to the Company’s consolidated
financial statements is not significant.

Costs incurred related to the acquisition were not significant.

Other Fiscal 2021 Acquisitions

During 2021, the Company completed other business combinations for an aggregate purchase price of
$105.0 million, of which $13.4 million was allocated to developed technology, $23.6 million was allocated to
other intangible assets and $63.2 million was allocated to goodwill.

Fiscal 2020 Acquisitions

Segment.io, Inc.

In November 2020, the Company acquired all outstanding shares of Segment, the market-leading

customer data platform, by issuing 9.5 million shares of its Class A common stock with a fair value of
$2.6 billion and $415.9 million in cash, as adjusted. Of the total shares of Class A common stock issued at
closing, 258,554 shares with the fair value of $70.7 million were subject to future vesting and are recorded
in the stock-based compensation expense as the services are provided. The total amortization period was
over 2.41 years from the date of acquisition. Part of the cash consideration was paid to settle the vested
equity awards of Segment employees. The Company assumed all unvested and outstanding equity awards
of Segment continuing employees as converted into its own equity awards at the conversion ratio provided
in the Agreement and Plan of Reorganization (the “Merger Agreement”).

The acquisition added additional products and services to the Company’s offerings for its customers.

With these additional products, the Company can now offer a customer engagement platform. The
acquisition has also added new customers, new employees, technology and intellectual property assets.

The acquisition was accounted for as a business combination and the total purchase price of

$3.0 billion, as adjusted, was allocated to the net tangible and intangible assets and liabilities based on their
fair values on the acquisition date with the excess recorded as goodwill.

The purchase price, as adjusted, reflected the $2.5 billion fair value of 9.3 million shares of the
Company’s Class A common stock transferred as consideration for accredited outstanding shares of
Segment, the $415.9 million cash consideration for unaccredited shares and vested equity awards and the
$39.0 million fair value of the pre-combination services of Segment employees reflected in the unvested
equity awards assumed by the Company on the acquisition date. As of December 31, 2021, 150,824 shares
of Class A common stock issued at closing with future vesting was held in escrow.

The fair value of the 9.5 million shares of the Company’s Class A common stock issued at closing was

determined based on its closing price on the acquisition date. The fair value of the assumed unvested
equity awards was determined (a) for options, by using a Black-Scholes option pricing model with the
applicable assumptions as of the acquisition date, and (b) for restricted stock units, by using the closing
market price of the Company’s Class A common stock on the acquisition date.

The fair value of unvested employee equity awards assumed on the acquisition date was

$245.3 million. These awards continue to vest as the Segment employees provide services in the post-
acquisition period. The fair value of these awards is recorded in the stock-based compensation expense
over the respective vesting period of each award.

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Notes to Consolidated Financial Statements (Continued)

7. Business Combinations (Continued)

The purchase price components, as adjusted, are summarized in the following table:

Total

(In thousands)
$2,532,329
415,899
38,972

Total purchase price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,987,200

The following table presents the purchase price allocation, as adjusted:

Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts receivable and other current assets . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating right-of-use asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangible assets(1) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Goodwill . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accounts payable and other liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Operating lease liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred tax liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total

(In thousands)
93,170
$
90,635
5,081
53,630
595,000
4,869
2,299,016
(24,263)
(50,005)
(58,206)
(21,728)

Total purchase price . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,987,200

(1)

Identifiable intangible assets are comprised of the following:

Developed technology . . . . . . . . . . . . . . . . . . . . . . . .
Customer relationships . . . . . . . . . . . . . . . . . . . . . . . .
Order backlog . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Trade names . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total

(In thousands)
$390,000
190,000
10,000
5,000

Estimated
life

(In years)
7
6
1
5

Total intangible assets acquired . . . . . . . . . . . . . .

$595,000

Developed technology consists of software products and domain knowledge around customer data

developed by Segment, which will enable Twilio to layer data across its platform to power timely and
personalized communications over the right channel, further enhancing the Company’s customer
engagement platform. Customer relationships consists of contracts with platform users that purchase
Segment’s products and services that carry distinct value.

The estimated fair value of the intangible assets acquired was determined by the Company. The

Company engaged a third-party expert to assist with the valuation analysis. The Company used a relief

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Notes to Consolidated Financial Statements (Continued)

7. Business Combinations (Continued)

from royalty method to estimate the fair values of the developed technology and a multi-period excess
earnings method to estimate the fair value of the customer relationships and order backlog.

Most of the net tangible assets were valued at their respective carrying amounts as of the acquisition

date, as the Company believes that these amounts approximate their current fair values, except for
operating right-of-use assets, which were reduced to their respective fair values as of the acquisition date.

The acquired entity’s results of operations were included in the Company’s consolidated financial

statements from the date of acquisition, November 2, 2020. For the year ended December 31, 2021,
Segment contributed net operating revenue of $200.9 million, which is reflected in the accompanying
consolidated statement of operations. Due to the integrated nature of the Company’s operations, the
Company believes that it is not practicable to separately identify earnings of Segment on a stand-alone
basis.

During the year ended December 31, 2020, the Company incurred costs related to this acquisition of
$20.8 million that were expensed as incurred and recorded in general and administrative expenses in the
accompanying consolidated statement of operations.

The following unaudited pro forma condensed combined financial information gives effect to the
acquisition of Segment as if it was consummated on January 1, 2019 (the beginning of the comparable
prior reporting period), and includes pro forma adjustments related to the amortization of acquired
intangible assets, share-based compensation expense, one-time tax benefit and direct and incremental
transaction costs reflected in the historical financial statements. Specifically, the following adjustments
were made:

• For the year ended December 31, 2020, the Company’s and Segment’s direct and incremental

transaction costs of $79.3 million are excluded from the pro forma condensed combined net loss.

• For the year ended December 31, 2019, the Company’s direct and incremental transaction costs of

$20.8 are included in the pro forma condensed combined net loss.

• In the year ended December 31, 2020, the pro forma condensed combined net loss includes a

reversal of the valuation allowance release of $13.8 million.

• In the year ended December 31, 2019, the pro forma condensed combined net loss includes a

one-time tax benefit of $38.1 that would have resulted from the acquisition, and an ongoing tax
benefit of $7.5 million.

This unaudited data is presented for informational purposes only and is not intended to represent or

be indicative of the results of operations that would have been reported had the acquisition occurred on
January 1, 2019. It should not be taken as representative of future results of operations of the combined
company.

The following table presents the unaudited pro forma condensed combined financial information:

Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net loss attributable to common stockholders . . . .

$1,874,720
$ (655,355)

$1,217,502
$ (576,962)

Year Ended December 31,

2020

2019

(Unaudited, in thousands)

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TWILIO INC.

Notes to Consolidated Financial Statements (Continued)

7. Business Combinations (Continued)

Other Fiscal 2020 Acquisitions

During 2020, the Company completed other business combinations for an aggregate purchase price of

$13.0 million. The total purchase price was allocated to the tangible and intangibles assets acquired and
liabilities assumed based on their fair values at the time of the acquisition. The Company does not consider
these acquisitions to be material, individually or in aggregate, to its consolidated financial statements.

8. Goodwill and Intangible Assets

Goodwill

Goodwill balance as of December 31, 2021 and 2020, was as follows:

Balance as of December 31, 2019 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total

(In thousands)
$2,296,784

Goodwill additions related to 2020 acquisitions . . . . . . . . . . . . . . . . . . .
Measurement period adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,303,780
(5,170)

Balance as of December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$4,595,394

Goodwill additions related to 2021 acquisitions . . . . . . . . . . . . . . . . . . .
Measurement period adjustments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

663,599
4,173

Balance as of December 31, 2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$5,263,166

Intangible assets

Intangible assets consisted of the following:

Amortizable intangible assets:

Developed technology . . . . . . . . . . . . . . . .
Customer relationships . . . . . . . . . . . . . . .
Supplier relationships . . . . . . . . . . . . . . . .
Trade names . . . . . . . . . . . . . . . . . . . . . . . .
Order backlog . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Patent

As of December 31, 2021

Gross

$ 794,831
538,264
51,671
30,669
10,000
4,035

Accumulated
Amortization

(In thousands)
(222,765)
(128,035)
(9,491)
(13,874)
(10,000)
(508)

Net

$ 572,066
410,229
42,180
16,795
—
3,527

Total amortizable intangible assets . . .

1,429,470

(384,673)

1,044,797

Non-amortizable intangible assets:

Telecommunication licenses . . . . . . . . . . .
Trademarks and other . . . . . . . . . . . . . . . .

4,920
295

—
—

4,920
295

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,434,685

(384,673)

$1,050,012

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Notes to Consolidated Financial Statements (Continued)

8. Goodwill and Intangible Assets (Continued)

Amortizable intangible assets:

Developed technology . . . . . . . . . . . . . . . . .
Customer relationships . . . . . . . . . . . . . . . . .
Supplier relationships . . . . . . . . . . . . . . . . . .
Trade names . . . . . . . . . . . . . . . . . . . . . . . . .
Order backlog . . . . . . . . . . . . . . . . . . . . . . . .
Patent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

As of December 31, 2020

Gross

$ 724,599
379,344
4,356
25,560
10,000
3,360

Accumulated
Amortization

(In thousands)
(113,282)
(59,574)
(3,044)
(7,921)
(1,667)
(373)

Net

$611,317
319,770
1,312
17,639
8,333
2,987

Total amortizable intangible assets . . . . .

1,147,219

(185,861)

961,358

Non-amortizable intangible assets:

Telecommunication licenses . . . . . . . . . . . .
Trademarks and other . . . . . . . . . . . . . . . . .

4,920
295

—
—

4,920
295

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,152,434

(185,861)

$966,573

Amortization expense was $198.8 million, $98.6 million and $72.9 million for the years ended

December 31, 2021, 2020 and 2019, respectively.

Total estimated future amortization expense is as follows:

As of
December 31,
2021

(In thousands)
$ 204,837
201,527
195,953
192,379
119,045
131,056

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$1,044,797

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Notes to Consolidated Financial Statements (Continued)

9. Accrued Expenses and Other Current Liabilities

Accrued expenses and other current liabilities consisted of the following:

Accrued payroll and related . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued bonus and commission . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued cost of revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Sales and other taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
ESPP contributions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Finance lease liability, current . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Accrued other expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

As of December 31,

2021

2020

(In thousands)

$ 78,780
64,665
118,004
61,975
10,284
12,370
71,425

$ 54,683
25,341
80,620
48,390
6,272
9,062
28,527

Total accrued expenses and other current liabilities . . . . . . . .

$417,503

$252,895

10. Notes Payable

Long-term debt consisted of the following:

As of December 31,

2021

2020

(In thousands)

2029 and 2031 Senior Notes

2029 Senior Notes

Principal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unamortized discount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Unamortized issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . .

$500,000
(5,701)
(1,286)

Net carrying amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

493,013

2031 Senior Notes

500,000
(5,832)
(1,274)

Net carrying amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

492,894

Convertible Senior Notes and Capped Call Transactions

Convertible Senior Notes

—
—
—

—

—
—
—

—

Net carrying amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—
—
—

—

343,702
(38,406)
(3,228)

302,068

Total long-term debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$985,907

$302,068

2029 and 2031 Senior Notes

In March 2021, the Company issued $1.0 billion aggregate principal amount of senior notes, consisting

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Notes to Consolidated Financial Statements (Continued)

10. Notes Payable (Continued)

“Notes”). Initially, none of the Company’s subsidiaries guaranteed the Notes. However, under certain
circumstances in the future the Notes can be guaranteed by each of the Company’s material domestic
subsidiaries. The 2029 Notes and 2031 Notes will mature on March 15, 2029 and March 15, 2031,
respectively. Interest payments are payable semi-annually in arrears on March 15 and September 15 of
each year, commencing on September 15, 2021.

The aggregate net proceeds from offering of the Notes were approximately $984.7 million after

deducting underwriting discounts and issuance costs paid by the Company. The issuance costs of
$2.8 million are amortized into interest expense using the effective interest method over the term of the
Notes.

The Company may voluntarily redeem the 2029 Notes, in whole or in part, under the following

circumstances:

(1) at any time prior to March 15, 2024 with the net cash proceeds received by the Company from

an equity offering at a redemption price equal to 103.625% of the principal amount, provided the
aggregate principal amount of all such redemptions does not exceed 40% of the original aggregate
principal amount of the 2029 Notes. Such redemption shall occur within 180 days after the closing of
an equity offering and at least 50% of the then-outstanding aggregate principal amount of the 2029
Notes shall remain outstanding, unless all 2029 Notes are redeemed concurrently;

(2) at any time prior to March 15, 2024 at 100% of the principal amount, plus a “make-whole”

premium;

(3) at any time on or after March 15, 2024 at a prepayment price equal to 101.813% of the

principal amount;

(4) at any time on or after March 15, 2025 at a prepayment price equal to 100.906% of the

principal amount; and

(5) at any time on or after March 15, 2026 at a prepayment price equal to 100.000% of the

principal amount;

in each case, the redemption will include the accrued and unpaid interest, as applicable.

The Company may voluntarily redeem the 2031 Notes, in whole or in part, under the following

circumstances:

(1) at any time prior to March 15, 2024 with the net cash proceeds received by the Company from

an equity offering at a redemption price equal to 103.875% of the principal amount, provided the
aggregate principal amount of all such redemptions does not to exceed 40% of the original aggregate
principal amount of the 2031 Notes. Such redemption shall occur within 180 days after the closing of
an equity offering and at least 50% of the then-outstanding aggregate principal amount of the 2031
Notes shall remain outstanding, unless all 2031 Notes are redeemed concurrently;

(2) at any time prior to March 15, 2026 at 100% of the principal amount, plus a “make-whole”

premium;

(3) at any time on or after March 15, 2026 at a prepayment price equal to 101.938% of the

principal amount;

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Notes to Consolidated Financial Statements (Continued)

10. Notes Payable (Continued)

(4) at any time on or after March 15, 2027 at a prepayment price equal to 101.292% of the

principal amount;

(5) at any time on or after March 15, 2028 at a prepayment price equal to 100.646% of the

principal amount; and

(6) at any time on or after March 15, 2029 at a prepayment price equal to 100.000% of the

principal amount;

in each case, the redemption will include accrued and unpaid interest, as applicable.

The Notes are unsecured obligations and will rank senior in right of payment to any of the Company’s

indebtedness that is expressly subordinated in right of payment to the Notes that the Company may incur
in the future and equal in right of payment with the Company’s existing and future liabilities that are not
subordinated.

In certain circumstances involving a change of control event, the Company will be required to make

an offer to repurchase all, or, at the holder’s option, any part, of each holder’s notes of that series at 101%
of the aggregate principal amount, plus accrued and unpaid interest, as applicable.

The indenture governing the Notes (the “Indenture”) contains covenants limiting the Company’s
ability and the ability of its subsidiaries to: (i) create liens on certain assets to secure debt; (ii) grant a
subsidiary guarantee of certain debt without also providing a guarantee of the Notes; and (iii) consolidate
or merge with or into, or sell or otherwise dispose of all or substantially all of its assets to another person.
These covenants are subject to a number of limitations and exceptions. Certain of these covenants will not
apply during any period in which the Notes are rated investment grade by either Moody’s Investors
Service, Inc. or Standard & Poor’s Ratings Services.

The interest expense recognized during the year ended December 31, 2021 was not significant.

As of December 31, 2021, the Company was in compliance with all of its financial covenants under the

Indenture.

Convertible Senior Notes and Capped Call Transactions

In May 2018, the Company issued $550.0 million aggregate principal amount of 0.25% convertible
senior notes due 2023 (“Convertible Notes”) in a private placement, including $75.0 million aggregate
principal amount of such Convertible Notes pursuant to the exercise in full of the over-allotment options
of the initial purchasers. The total net proceeds from this offering, after deducting initial purchaser
discounts and debt issuance costs paid by the Company, were approximately $537.0 million. The
Convertible Notes had the original maturity date of June 1, 2023, unless earlier repurchased or redeemed
by the Company or converted pursuant to their terms.

On May 18, 2021, the Company issued a notice of redemption for its Convertible Notes and in June

2021, redeemed all of the remaining outstanding principal amount of the Convertible Notes. During 2021
and through the date of the redemption, the Company converted $343.7 million aggregate principal
amount of the Convertible Notes by issuing 4,846,965 shares of its Class A common stock. Of the
$1.7 billion total value of these transactions, $1.4 billion and $335.7 million were allocated to the equity

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Notes to Consolidated Financial Statements (Continued)

10. Notes Payable (Continued)

and liability components, respectively, utilizing the effective interest rate to determine the fair value of the
liability component. The selected interest rate reflected the Company’s incremental borrowing rate,
adjusted for the Company’s credit standing on nonconvertible debt with similar maturity. The
extinguishment of these Convertible Notes resulted in a $29.0 million loss that is included in other
(expenses) income, net, in the accompanying consolidated statement of operations. No sinking fund was
provided for these Convertible Notes.

In the year ended December 31, 2020, the Company converted $206.3 million aggregate principal
amount of the Convertible Notes by issuing 2,902,434 shares of its Class A common stock and $2.0 million
of cash. Of the $894.6 million total value of these transactions, $701.9 million and $192.7 million were
allocated to the equity and liability components, respectively. The extinguishment of these notes resulted
in a $12.9 million loss and was included in other (expenses) income, net, in the accompanying consolidated
statements of operations. There were no conversions in the year ended December 31, 2019.

Prior to their redemption, the Convertible Notes were convertible at the option of the holders only

under the following circumstances:

(1) during any calendar quarter commencing after September 30, 2018, and only during such
calendar quarter, if the last reported sale price of the Class A common stock for at least 20 trading
days (whether or not consecutive) in a period of 30 consecutive trading days ending on, and including,
the last trading day of the immediately preceding calendar quarter is more than or equal to 130% of
the conversion price on each applicable trading day;

(2) during the five business days period after any five consecutive trading day period in which, for

each trading day of that period, the trading price per $1,000 principal amount of Convertible Notes
for such trading day was less than 98% of the product of the last reported sale price of the Class A
common stock and the conversion rate on each such trading day;

(3) upon the Company’s notice that it is redeeming any or all of the Convertible Notes; or

(4) upon the occurrence of specified corporate events.

Each $1,000 principal amount of the Convertible Notes was initially convertible into 14.104 shares of

the Company’s Class A common stock par value $0.001, which was equivalent to an initial conversion price
of approximately $70.90 per share. The conversion rate was subject to adjustment upon the occurrence of
certain specified events but would not be adjusted for any accrued and unpaid special interest. In addition,
upon the occurrence of a make-whole fundamental change, as defined in the indenture, the Company
would, in certain circumstances, increase the conversion rate by a number of additional shares for a holder
that elects to convert its Notes in connection with such make-whole fundamental change or during the
relevant redemption period. Further, the Convertible Notes could bear special interest under specified
circumstances relating to the Company’s failure to comply with its reporting obligations under the
indenture relating to the issuance of Convertible Notes (the “indenture”) or if the Convertible Notes were
not freely tradeable as required by the indenture. None of the above mentioned events occurred during the
period the notes were outstanding and prior to the redemption.

Upon conversion, the Company had an ability to pay or deliver, as the case may be, cash, shares
of Class A common stock, or a combination of cash and shares of Class A common stock, at the Company’s
election. Throughout the period the Convertible Notes were outstanding the conditional redemption
feature was triggered several times and the Company settled the notes presented for conversion primarily
in shares of its Class A common stock.

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Notes to Consolidated Financial Statements (Continued)

10. Notes Payable (Continued)

The foregoing description is qualified in its entirety by reference to the text of the indenture and the
form of 0.25% convertible senior notes due 2023, which were filed as exhibits to the Company’s Quarterly
Report on Form 10-Q for the quarter ended June 30, 2018, and are incorporated herein by reference.

In accounting for the issuance of the Convertible Notes, the Company separated the Convertible
Notes into liability and equity components. The carrying amount of the liability component was calculated
by measuring the fair value of a similar debt instrument that does not have an associated convertible
feature. The carrying amount of the equity component representing the conversion option was
$119.4 million and was determined by deducting the fair value of the liability component from the par
value of the Notes. The equity component was not remeasured as long as it continued to meet the
conditions for equity classification. The excess of the principal amount of the liability component over its
carrying amount, or the debt discount, was amortized to interest expense at an annual effective interest
rate of 5.7% over the contractual terms of the Convertible Notes.

In accounting for the transaction costs related to the Convertible Notes, the Company allocated the

total amount incurred to the liability and equity components of the Convertible Notes based on the
proportion of the proceeds allocated to the debt and equity components. Issuance costs attributable to the
liability component were approximately $10.2 million, were recorded as an additional debt discount and
were amortized to interest expense using the effective interest method over the contractual terms of the
Convertible Notes and were written off upon the redemption of the Convertible Notes. Issuance costs
attributable to the equity component were netted with the equity component in stockholders’ equity.

The net carrying amount of the equity component of the Convertible Notes was as follows:

Proceeds allocated to the conversion options (debt discount) . . . .
Issuance costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

As of December 31,

2021

2020

(In thousands)
$ — $74,636
(2,819)
(2,819)

Net carrying amount . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(2,819)

$71,817

In connection with the offering of the Convertible Notes in May 2018, the Company entered into
privately negotiated capped call transactions with certain counterparties (the “capped calls”). The capped
calls each had an initial strike price of approximately $70.90 per share, subject to certain adjustments,
which corresponded to the initial conversion price of the Notes. The capped calls had initial cap prices of
$105.04 per share, subject to certain adjustments. The capped calls covered, subject to anti-dilution
adjustments, approximately 7,757,200 shares of Class A common stock. The capped calls were generally
intended to reduce or offset the potential dilution to the Class A common stock upon any conversion of
the Notes with such reduction or offset, as the case may be, subject to a cap based on the cap price.

Concurrently with the redemption of the Convertible Notes, the Company settled its capped call

arrangement. The capped call arrangement was settled in June 2021 for gross cash consideration of
$229.8 million received by the Company and recorded in additional paid-in-capital, net of $1.4 million in
transaction costs and a $3.2 million realized gain. The gain was primarily driven by the change in the fair
value of the Company’s Class A common stock on the transaction settlement date. The gain was recorded
in other (expenses) income, net, in the accompanying consolidated statement of operations.

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Notes to Consolidated Financial Statements (Continued)

11. Supplemental Balance Sheet Information

A roll-forward of the Company’s customer credit reserve is as follows:

Year Ended December 31,

2021

2020

2019

Balance, beginning of period . . . . . . . . . . . . . . . . . . .
Additions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deductions against reserve . . . . . . . . . . . . . . . . . . . . .

$ 16,783
55,937
(54,143)

(In thousands)
$ 6,784
50,817
(40,818)

$ 3,015
18,143
(14,374)

Balance, end of period . . . . . . . . . . . . . . . . . . . . . . .

$ 18,577

$ 16,783

$ 6,784

12. Revenue by Geographic Area

Revenue by geographic area is based on the IP address or the mailing address at the time of

registration. The following table sets forth revenue by geographic area:

Year Ended December 31,

2021

2020

2019

Revenue by geographic area:

United States . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . .
International

$1,881,873
959,966

(In thousands)
$1,282,213
479,563

$ 808,857
325,611

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$2,841,839

$1,761,776

$1,134,468

Percentage of revenue by geographic area:

United States . . . . . . . . . . . . . . . . . . . . . . . . .
. . . . . . . . . . . . . . . . . . . . . . . . .
International

66%
34%

73%
27%

71%
29%

Long-lived assets outside of the United States were not significant.

13. Commitments and Contingencies

(a) Lease and Other Commitments

The Company entered into various non-cancelable operating lease agreements for its facilities. See
Note 6 to these consolidated financial statements for additional detail on the Company’s operating lease
commitments.

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Notes to Consolidated Financial Statements (Continued)

13. Commitments and Contingencies (Continued)

Additionally, the Company has contractual commitments with its cloud infrastructure provider,
network service providers and other vendors that are noncancellable and expire within one to four years.
Future minimum payments under these noncancellable purchase commitments were as follows.
Unrecognized tax benefits are not included in these amounts because any amounts expected to be settled
in cash are not material:

Year Ending December 31,
2022 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2023 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2024 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

As of
December 31,
2021

(In thousands)
$213,106
222,852
35,066
561

Total payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$471,585

In February 2021, the Company entered into a Framework Agreement, as subsequently amended,

with Syniverse Corporation (“Syniverse”) and Carlyle Partners V Holdings, L.P. (“Carlyle”) (the
“Framework Agreement”), pursuant to which Syniverse would issue to the Company shares of Syniverse
common stock in consideration for an investment by the Company of up to $750.0 million. In August 2021,
Syniverse entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Blue Steel
Merger Sub Inc. (the “Merger Sub”) and M-3 Brigade Acquisition II Corp. (“MBAC”), which would result
in Syniverse being a wholly owned subsidiary of MBAC (the “Merger”). Concurrently, the Company and
MBAC entered into the Twilio Subscription Agreement (the “Subscription Agreement”), pursuant to
which the Company agreed, subject to the terms and conditions set forth therein, to subscribe for and
purchase, and MBAC agreed to issue and sell to the Company, immediately prior to the closing of the
Merger, shares of Class A common stock and, if applicable, shares of Class C common stock for an
aggregate amount up to $750.0 million, depending on redemptions by MBAC’s shareholders. In
connection with the closing of the investment, the Company and Syniverse (or their respective
subsidiaries) would enter into a wholesale agreement.

See Note 18 for details on developments on this transaction which occurred in the period subsequent

to December 31, 2021.

(b) Legal Matters

The City and County of San Francisco (“San Francisco”) has assessed the Company for additional
Telephone Users Tax (“TUT”) and Access Line Tax (“ALT”) on certain of the Company’s services for the
years 2009 through 2018. The assessments totaled $38.8 million, including interest and penalties. The
Company paid the assessments under protest in the third quarter of 2020.

On May 27, 2021, the Company filed a lawsuit against San Francisco in San Francisco Superior Court
challenging the assessments. The Company raised numerous defenses to the assessments including that its
services are not telecommunications services, application of the taxes to Twilio’s services violates the
Internet Tax Freedom Act and San Francisco does not have jurisdiction to impose tax on services provided
outside of San Francisco. The Company is seeking refunds of the taxes paid, waivers of interest and
penalties, cost of suit and reasonable attorneys’ fees, and other legal and equitable relief as the court
deems appropriate.

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Notes to Consolidated Financial Statements (Continued)

13. Commitments and Contingencies (Continued)

The Company believes it has strong arguments against the assessments, but litigation is uncertain and

there is no assurance that it will prevail in court. Should the Company lose on one or more of its
arguments, it could incur additional losses associated with taxes, interest, and penalties that together, in
aggregate, could be material. The Company regularly assesses the likelihood of adverse outcomes resulting
from tax disputes such as this and examines all open years to determine the necessity and adequacy of any
tax reserves. The Company’s tax reserves are further discussed in Note 13(d) of these consolidated
financial statements.

In addition to the litigation discussed above, from time to time, the Company may be subject to legal

actions and claims in the ordinary course of business. The Company has received, and may in the future
continue to receive, claims from third parties asserting, among other things, infringement of their
intellectual property rights. Future litigation may be necessary to defend the Company, its partners and its
customers by determining the scope, enforceability and validity of third-party proprietary rights, or to
establish our proprietary rights. 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.

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 consolidated statements of
operations.

The Company has signed indemnification agreements with all of its board members and executive

officers. The agreements indemnify the board members and executive officers from claims and expenses
on actions brought against the individuals separately or jointly with the Company for certain indemnifiable
events. Indemnifiable events generally mean any event or occurrence related to the fact that the board
member or the executive officer was or is acting in his or her capacity as a board member or an executive
officer for the Company or was or is acting or representing the interests of the Company.

In the ordinary course of business and in connection with our financing and business combinations

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 various products, or its acts or omissions. In these circumstances, payment may be
conditional on the other party making a claim pursuant to the procedures specified in the particular
contract. Further, the Company’s obligations under these agreements may be limited in terms of time and/
or amount, and in some instances, the Company may have recourse against third parties for certain
payments. The terms of such obligations may vary.

As of December 31, 2021 and 2020, no amounts were accrued related to any outstanding

indemnification agreements.

(d) Other Taxes

The Company conducts operations in many tax jurisdictions within and outside 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. In the last several years the Company has expanded

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Notes to Consolidated Financial Statements (Continued)

13. Commitments and Contingencies (Continued)

to collect taxes in most jurisdictions where it operates. The Company continues to carry reserves for
certain of its prior 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. For example, San Francisco City and County has assessed the Company
for $38.8 million in taxes, including interest and penalties, which exceeded the $11.5 million the Company
had accrued for the period covered by this assessment. The Company paid the full amount as required by
law. The payment made in excess of the accrued amount is reflected as a deposit in the accompanying
consolidated balance sheets. The Company believes, however, that this assessment is incorrect and, after
failing to reach a settlement, filed a lawsuit on May 27, 2021 contesting the assessment as described above.
However, litigation is uncertain and a ruling against the Company, or a dismissal of our complaint, may
adversely affect its financial position and results of operations.

As of December 31, 2021, the liabilities recorded for these taxes were $25.4 million for domestic

jurisdictions and $17.7 million for jurisdictions outside of the United States. As of December 31, 2020,
these liabilities were $25.6 million and $9.6 million, respectively.

14. Stockholders’ Equity

Preferred Stock

As of December 31, 2021 and 2020, the Company had authorized 100,000,000 shares of preferred

stock, par value $0.001, of which no shares were issued and outstanding.

Common Stock

As of December 31, 2021 and 2020, the Company had authorized 1,000,000,000 shares of Class A

common stock and 100,000,000 shares of Class B common stock, each par value $0.001 per share. As of
December 31, 2021, 170,625,994 shares of Class A common stock and 9,842,105 shares of Class B common
stock were issued and outstanding. As of December 31, 2020, 153,496,222 shares of Class A common stock
and 10,551,302 shares of Class B common stock were issued and outstanding.

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TWILIO INC.

Notes to Consolidated Financial Statements (Continued)

14. Stockholders’ Equity (Continued)

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

Stock options issued and outstanding . . . . . . . . . . . . . . . . . . .
Unvested restricted stock units issued and outstanding . . . .
Class A common stock reserved for Twilio.org . . . . . . . . . . .
Stock-based awards available for grant under 2016 Plan . . .
Stock-based awards available for grant under ESPP . . . . . . .
Class A common stock reserved for the Convertible

As of December 31,

2021

2020

3,351,313
6,475,700
618,857
24,650,104
6,382,830

5,625,735
7,523,882
707,265
18,942,205
4,941,281

Notes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

—

7,569,731

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

41,478,804

45,310,099

Public Equity Offerings

In February 2021, August 2020 and June 2019, the Company completed public equity offerings in
which it sold 4,312,500 shares, 5,819,838 shares and 8,064,515 shares, respectively, of its Class A common
stock at a public offering price of $409.60, $247.00 and $124.00 per share, respectively. The Company
received total proceeds of $1.8 billion, $1.4 billion and $979.0 million, respectively, net of underwriting
discounts and offering expenses paid by the Company.

15. Stock-Based Compensation

2008 Stock Option Plan

The Company maintained a stock plan, the 2008 Stock Option Plan, as amended and restated (the

“2008 Plan”), which allowed the Company to grant incentive (“ISO”), non-‘statutory (“NSO”) stock
options and restricted stock units (“RSU”) to its employees, directors and consultants to participate in the
Company’s future performance through stock-‘based awards at the discretion of the board of directors.
Under the 2008 Plan, options to purchase the Company’s common stock could not be granted at a price
less than fair value in the case of ISOs and NSOs. Fair value was determined by the board of directors, in
good faith, with input from valuation consultants. On June 22, 2016, the plan was terminated in connection
with the Company’s IPO. Accordingly, no shares are available for future issuance under the 2008 Plan. The
2008 Plan continues to govern outstanding equity awards granted thereunder. The Company’s right of first
refusal for outstanding equity awards granted under the 2008 Plan terminated upon completion of the
IPO. All remaining outstanding stock options granted under the 2008 Plan are vested and exercisable.

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The Company’s 2016 Stock Option and Incentive Plan (the “2016 Plan”) became effective on June 21,

2016. The 2016 Plan provides for the grant of ISOs, NSOs, restricted stock, RSUs, stock appreciation
rights, unrestricted stock awards, performance share awards, dividend equivalent rights and cash-based
awards to employees, directors and consultants of the Company. A total of 11,500,000 shares of the
Company’s Class A common stock were initially reserved for issuance under the 2016 Plan. These available
shares automatically increase each January 1, beginning on January 1, 2017, by 5% of the number of shares
of the Company’s Class A and Class B common stock outstanding on the immediately preceding
December 31, or such lesser number of shares as determined by the Company’s compensation committee.

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Notes to Consolidated Financial Statements (Continued)

15. Stock-Based Compensation (Continued)

On January 1, 2021 and 2020, the shares available for grant under the 2016 Plan were automatically
increased by 8,202,376 shares and 6,920,640 shares, respectively.

Under the 2016 Plan, the stock options are granted at a price per share not less than 100% of the fair

market value per share of the underlying common stock on the date of grant.

Segment 2013 Stock Incentive Plan

In connection with its acquisition of Segment, the Company assumed and replaced all stock options

and restricted stock units of continuing employees issued under Segment’s 2013 Stock Incentive Plan
(“Segment Plan”) that were unvested and outstanding on the acquisition date. The assumed equity awards
will continue to be outstanding and will be governed by the provisions of the Segment Plan.

SendGrid 2009, 2012 and 2017 Stock Incentive Plans

In connection with its acquisition of SendGrid, the Company assumed all stock options and restricted

stock units issued under SendGrid’s 2009, 2012 and 2017 Stock Incentive Plans that were outstanding on
the date of acquisition. The assumed equity awards will continue to be outstanding and will be governed by
the provisions of their respective plans. Additionally, the Company assumed shares of SendGrid common
stock that were reserved and available for issuance under SendGrid’s 2017 Equity Incentive Plan, on an as
converted basis. These shares can be utilized for future equity grants under the Company’s 2016 Plan, to
the extent permitted by New York Stock Exchange rules.

Zipwhip 2008 Stock Plan and 2018 Equity Incentive Plan

In connection with its acquisition of Zipwhip, the Company assumed and replaced all stock options

and restricted stock units of continuing employees issued under Zipwhip Amended and Restated 2008
Stock Plan and 2018 Equity Incentive Plan (“Zipwhip Plans”) that were unvested and outstanding on the
acquisition date. The assumed equity awards will continue to be outstanding and will be governed by the
provisions of the Zipwhip Plans.

Under all plans, stock options generally expire 10 years from the date of grant and vest over periods

determined by the board of directors. The vesting period for stock options and restricted stock units is
generally four years from the date of grant. For existing employees and, effective February 2021, for
new-hires the stock options and restricted stock units vest in equal monthly and quarterly installments,
respectively, over the service period.

2016 Employee Stock Purchase Plan

The Company’s Employee Stock Purchase Plan (“2016 ESPP”), as amended, initially became effective

on June 21, 2016. A total of 2,400,000 shares of the Company’s Class A common stock were initially
reserved for issuance under the 2016 ESPP. These available shares automatically increase each January 1,
beginning on January 1, 2017, by the lesser of 1,800,000 shares of the Company’s Class A common stock,
1% of the number of shares of the Company’s Class A and Class B common stock outstanding on the
immediately preceding December 31 or such lesser number of shares as determined by the Company’s
compensation committee. On January 1, 2021 and 2020, the shares available for grant under the 2016
ESPP were automatically increased by 1,640,475 shares and 1,384,128 shares, respectively.

The 2016 ESPP allows eligible employees to purchase shares of the Company’s Class A common stock

at a discount of up to 15% through payroll deductions of their eligible compensation, subject to any plan

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TWILIO INC.

Notes to Consolidated Financial Statements (Continued)

15. Stock-Based Compensation (Continued)

limitations. The 2016 ESPP provides for separate six-month offering periods beginning in May and
November of each fiscal year.

On each purchase date, eligible employees purchase the Company’s stock at a price per share equal to
85% of the lesser of (i) the fair market value of the Company’s Class A common stock on the offering date
or (ii) the fair market value of the Company’s Class A common stock on the purchase date.

As of December 31, 2021, total unrecognized compensation cost related to the 2016 ESPP was not

significant.

Stock-options and restricted stock units activity under the Company’s 2008 Plan and 2016 Plan as well

as respective Stock Incentive Plans of SendGrid and Segment was as follows:

Stock Options

Outstanding options as of December 31, 2020 . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Assumed in acquisition . . . . . . . . . . . . . . . . . . . . . . . . . .
Exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited and canceled . . . . . . . . . . . . . . . . . . . . . . . . . .

Weighted-
average
remaining
contractual
term
(In years)

Aggregate
intrinsic
value
(In thousands)

6.85

$1,454,222

Number of
options
outstanding

5,070,735
350,208
83,539
(1,733,819)
(419,350)

Weighted-
average
exercise
price
(Per share)

$ 51.71
343.94
49.26
40.44
131.01

Outstanding options as of December 31, 2021 . . . . . . . . .

3,351,313

$ 78.10

6.09

$ 646,760

Options vested and exercisable as of December 31,

2021 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

2,152,819

$ 37.21

4.92

$ 490,502

Year Ended December 31,

2021

2020

2019

(In thousands, except per share amounts)

Aggregate intrinsic value of stock options

exercised (1)

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$508,539

$603,597

$394,998

Total estimated grant date fair value of options

vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$138,851

$107,854

$ 81,292

Weighted-average grant date fair value per share

of options granted . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 216.29

$ 170.70

58.13

(1) Aggregate intrinsic value represents the difference between the fair value of the
Company’s Class A common stock as reported on the New York Stock Exchange
and the exercise price of outstanding “in-the-money” options.

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As of December 31, 2020, the Company had outstanding 555,000 shares of performance-based stock

options with a weighted average exercise price of $31.72 and an aggregate intrinsic value of $170.3 million.
All performance conditions had been met. During the year ended December 31, 2021, all of these stock
options were exercised. The aggregate intrinsic value of these stock options exercised was $140.2 million.
As of December 31, 2021, no performance-based stock options remain outstanding.

As of December 31, 2021, total unrecognized compensation cost related to all unvested stock options
was $151.5 million, which will be amortized on a ratable basis over a weighted-average period of 2.2 years.

127

TWILIO INC.

Notes to Consolidated Financial Statements (Continued)

15. Stock-Based Compensation (Continued)

Restricted Stock Units

Unvested RSUs as of December 31, 2020 . . . . . . . . . . . . . . . . . . . . . . .
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Forfeited and canceled . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$131.76
7,523,882
328.38
3,465,980
(3,493,652)
114.70
(1,020,510) $188.76

Number of
awards
outstanding

Weighted-
average
grant date
fair value
(Per share)

Aggregate
intrinsic
value
(In thousands)

$2,542,858

Unvested RSUs as of December 31, 2021 . . . . . . . . . . . . . . . . . . . . . . .

6,475,700

$237.22

$1,705,311

As of December 31, 2021, the Company had outstanding 24,697 restricted stock awards (“RSAs”) that

were held in escrow with future vesting conditions. The aggregate intrinsic value of these awards was not
significant.

As of December 31, 2021, total unrecognized compensation cost related to unvested RSUs and RSAs

was $1.4 billion, which will be amortized over a weighted-average period of 3.1 years.

As of December 31, 2021, the unrecognized compensation cost related to Class A common stock
subject to future vesting conditions is $60.1 million, which will be amortized over a term of 2.0 years.

Valuation Assumptions

The fair value of employee stock options was estimated on the date of grant using the following

assumptions in the Black-Scholes option pricing model:

Employee Stock Options:

2021

2020

2019

Year Ended December 31,

Fair value of common stock . . . . . . . . . . . . . . . . $268.55—$409.21
Expected term (in years) . . . . . . . . . . . . . . . . . . .
Expected volatility . . . . . . . . . . . . . . . . . . . . . . . .
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . .
Dividend rate . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Employee Stock Purchase Plan:
Expected term (in years) . . . . . . . . . . . . . . . . . . .
Expected volatility . . . . . . . . . . . . . . . . . . . . . . . .
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . .
Dividend rate . . . . . . . . . . . . . . . . . . . . . . . . . . . .

0.50
46.4%—58.7%
—%—0.1%
—%

0.30—6.39
42.9%—61.5%
0.1%—1.4%
—%

$108.37—$301.72
0.52—6.08
51.9%—65.1%
0.1%—1.4%
—%

$103.70—$130.70
0.33—6.08
49.0%—66.5%
1.6%—2.5%
—%

0.50
54.4%—72.1%
0.1%—0.2%
—%

0.49—0.50
43.1%—50.3%
1.6%—2.4%
—%

128

TWILIO INC.

Notes to Consolidated Financial Statements (Continued)

15. Stock-Based Compensation (Continued)

Stock-Based Compensation Expense

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

Year Ended December 31,

2021

2020

2019

(In thousands)

Cost of revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Research and development . . . . . . . . . . . . . . . . . . . .
Sales and marketing . . . . . . . . . . . . . . . . . . . . . . . . . .
General and administrative . . . . . . . . . . . . . . . . . . . .

$ 14,074
258,672
213,351
146,188

8,857
173,303
103,450
76,301

7,123
126,012
60,886
70,297

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$632,285

$361,911

$264,318

16. 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:

Year Ended December 31,

2021

2020

2019

Net loss attributable to common stockholders (in

thousands) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(949,900) $

(490,979) $

(307,063)

Weighted-average shares used to compute net loss per share
attributable to common stockholders, basic and diluted . . .

Net loss per share attributable to common stockholders,

174,180,465

146,708,663

130,083,046

basic and diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(5.45) $

(3.35) $

(2.36)

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:

Stock options issued and outstanding . . . . . . . . . . . . . . .
Restricted stock units issued and outstanding . . . . . . . .
Class A common stock reserved for Twilio.org . . . . . . .
Class A common stock committed under ESPP . . . . . . .
Convertible Notes(1)
. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Class A common stock in escrow . . . . . . . . . . . . . . . . . . .
Class A common stock in escrow and restricted stock

As of December 31,

2021

2020

2019

3,351,313
6,475,700
618,857
147,947
—
75,506

5,625,735
7,523,882
707,265
103,703
4,847,578
75,612

7,705,848
8,490,517
795,673
207,792
3,150,647
—

awards subject to future vesting . . . . . . . . . . . . . . . . . .

235,054

268,030

—

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

10,904,377

19,151,805

20,350,477

(1) The Convertible Notes were fully redeemed in 2021 and were no longer outstanding as of

December 31, 2021. As of December 31, 2020, the Company expected to settle the principal amount
of the notes in shares of its Class A common stock, and as such used the if-converted method to
calculate any potential dilutive effect of the debt settlement on diluted net income per share, if
applicable. Prior to the fourth quarter 2020, the Company expected to settle the principal amount of

129

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TWILIO INC.

Notes to Consolidated Financial Statements (Continued)

16. Net Loss Per Share Attributable to Common Stockholders (Continued)

these notes in cash and any excess in shares of the Company’s Class A common stock. Hence, as of
December 31, 2019, the Company used the treasury stock method to calculate any potential dilutive
effect of the conversion spread on diluted net income per share, if applicable. The conversion spread
has a dilutive impact on diluted net income per share of Class A common stock when the average
market price of the Company’s Class A common stock for a given period exceeds the conversion price
of $70.90 per share for the Convertible Notes. The conversion spread was calculated using the average
market price of Class A common stock during the period, consistent with the treasury stock method.

17. Income Taxes

The following table presents domestic and foreign components of loss before income taxes for the

periods presented:

United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
International . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$(737,360)
(223,569)

(In thousands)
$(403,148)
(101,278)

$(328,902)
(33,314)

Loss before provision for income taxes . . . . . .

$(960,929)

$(504,426)

$(362,216)

Year Ended December 31,

2021

2020

2019

Benefit for income taxes consists of the following:

Current:

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Federal
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Total
Deferred:
Federal
. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Year Ended December 31,

2021

2020

2019

(In thousands)

— $
272
5,215

5,487

122
420
8,274

8,816

—
198
2,684

2,882

(13,772)
(4,083)
(1,990)

(12,719)
(3,563)
(2,652)

(49,393)
(7,474)
(1,168)

Total

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(19,845)

(18,934)

(58,035)

Income tax benefit . . . . . . . . . . . . . . . . . . . . . . . .

$(11,029)

$(13,447)

$(55,153)

130

TWILIO INC.

Notes to Consolidated Financial Statements (Continued)

17. Income Taxes (Continued)

The following table presents a reconciliation of the statutory federal tax rate and the Company’s

effective tax rate:

Tax benefit at federal statutory rate . . . . . . . . . . .
State tax, net of federal benefit . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . .
Credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Foreign rate differential . . . . . . . . . . . . . . . . . . . . .
Permanent book vs. tax differences . . . . . . . . . . . .
Change in valuation allowance . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Effective tax rate . . . . . . . . . . . . . . . . . . . . . . . . .

Year Ended December 31,

2021

2020

2019

21%
8
16
4
(1)
—
(46)
—

21%
12
24
3
(4)
(1)
(51)
—

21%
8
14
4
(2)
—
(29)
(1)

15%

Deferred income taxes reflect the net tax effects of temporary differences between the carrying amounts

of assets and liabilities for financial reporting purposes and the amounts used for income tax purposes. The
following table presents the significant components of the Company’s deferred tax assets and liabilities:

Deferred tax assets:

As of December 31,

2021

2020

(In thousands)

Net operating loss carryforwards . . . . . . . . . . . . . . . . . . . .
Accrued and prepaid expenses . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . .
Research and development credits . . . . . . . . . . . . . . . . . .
Charitable contributions . . . . . . . . . . . . . . . . . . . . . . . . . . .
Capped call . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Debt issuance cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Depreciable property . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Lease liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

$ 1,054,585
24,831
44,261
148,282
15,219
—
—
3,675
135,500
71,651
14,567

$ 656,755
15,408
32,900
92,899
8,229
4,475
230
—
135,500
68,566
—

Gross deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . .
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . .

1,512,571
(1,136,827)
375,744

1,014,962
(677,782)
337,180

Deferred tax liabilities:

Capitalized software . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Acquired intangibles . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . .
Convertible debt . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Right-of-use asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Deferred commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

(28,825)
(1,649)
(251,034)
—
—
(64,277)
(47,897)
—

(19,174)
(450)
(231,379)
(85)
(9,495)
(66,243)
(21,162)
(2,876)

Net deferred tax liability . . . . . . . . . . . . . . . . . . . . . . . . .

(17,938)

$ (13,684)

131

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TWILIO INC.

Notes to Consolidated Financial Statements (Continued)

17. Income Taxes (Continued)

The following table summarizes our tax carryforwards, carryovers, and credits:

As of
December 31, 2021

(In thousands)

Expiration Date (If not utilized)

Federal net operating loss

carryforwards . . . . . . . . . . . . . .
Federal tax credits . . . . . . . . . . . .
Federal net operating loss

carryforwards . . . . . . . . . . . . . .

State net operating loss

carryforwards . . . . . . . . . . . . . .
State tax credits . . . . . . . . . . . . . .
Foreign net operating loss

carryforwards . . . . . . . . . . . . . .

$
$

320,167
132,920

Various dates beginning in 2029
Various dates beginning in 2029

3,906,263

Indefinite

2,737,083
84,858

Various dates beginning in 2025
Indefinite

268,653

Indefinite

A limitation may apply to the use of the net operating loss and credit carryforwards, under provisions

of the Internal Revenue Code of 1986, as amended, and similar state tax provisions that are applicable if
the Company experiences an “ownership change.” An ownership change may occur, for example, as a
result of issuance of new equity. Should these limitations apply, the carryforwards would be subject to an
annual limitation, resulting in a potential reduction in the gross deferred tax assets before considering the
valuation allowance.

The Company’s accounting for deferred taxes involves the evaluation of a number of factors

concerning the realizability of its net deferred tax assets. The Company primarily considered such factors
as its history of operating losses, the nature of the Company’s deferred tax assets, and the timing,
likelihood and amount, if any, of future taxable income during the periods in which those temporary
differences and carryforwards become deductible. Additionally, in December 2020, the Company
completed an intra-entity asset transfer of certain intellectual property rights to an Irish subsidiary where
its international business is headquartered. The transfer resulted in a step-up in the tax basis of the
transferred intellectual property rights and a correlated $135.5 million increase in foreign deferred tax
assets.

At present, the Company does not believe that it is more likely than not that the federal, state and

foreign net deferred tax assets will be realized, and accordingly, a full valuation allowance has been
established. The valuation allowance increased by approximately $459.0 million and $421.9 million during
the years ended December 31, 2021 and 2020, respectively.

A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows:

Unrecognized tax benefit, beginning of year . . . . . . .
Gross increases for tax positions of prior years . . . . .
Gross decrease for tax positions of prior years . . . . .
Gross increases for tax positions of current year . . . .

Year Ended December 31,

2021

2020

2019

$191,183
3,496
(10,693)
39,394

(In thousands)
$ 49,042
4,259
(931)
138,813

$15,635
12,939
(395)
20,863

Unrecognized tax benefit, end of year . . . . . . . . . .

$223,380

$191,183

$49,042

132

TWILIO INC.

Notes to Consolidated Financial Statements (Continued)

17. Income Taxes (Continued)

As of December 31, 2021, the Company had approximately $223.4 million of unrecognized tax
benefits. If the $223.4 million is recognized, $6.6 million would affect the effective tax rate. The remaining
amount would be offset by the reversal of related deferred tax assets which are subject to a full valuation
allowance.

The Company recognizes interest and penalties, if any, related to uncertain tax positions in its income

tax provision. As of December 31, 2021 and 2020, such amounts are not significant.

The Company does not anticipate any significant changes within 12 months of December 31, 2021, in
its uncertain tax positions that would be material to the consolidated financial statements taken as a whole
because nearly all of the unrecognized tax benefit has been offset by a deferred tax asset, which has been
reduced by a valuation allowance.

The Company files U.S. federal income tax returns as well as income tax returns in many U.S. states
and foreign jurisdictions. As of December 31, 2021, the tax years 2008 through the current period remain
open to examination by the major jurisdictions in which the Company is subject to tax. Fiscal years outside
the normal statute of limitation remain open to audit by tax authorities due to tax attributes generated in
those early years, which have been carried forward and may be audited in subsequent years when utilized.
The Company is fully reserved for all open U.S. federal, state and local, or non-U.S. income tax
examinations by any tax authorities.

On June 7, 2019, a three-judge panel from the U.S. Court of Appeals for the Ninth Circuit overturned

the U.S. Tax Court’s decision in Altera Corp. v. Commissioner and upheld the portion of the Treasury
regulations under Section 482 of the Internal Revenue Code that requires related parties in a cost-sharing
arrangement to share expenses related to share-based compensation. As a result of this decision, the
Company’s gross unrecognized tax benefits increased to reflect the impact of including share-based
compensation in cost-sharing arrangements. On July 22, 2019, Altera filed a petition for a rehearing before
the full Ninth Circuit and the request was denied on November 12, 2019. On February 10, 2020, Altera
filed a petition to appeal the decision to the Supreme Court and on June 22, 2020 the Supreme Court
denied the petition. There is no impact on the Company’s effective tax rate for years ended December 31,
2021 and 2020 due to a full valuation allowance against its deferred tax assets. We will continue to monitor
future developments and their potential effects on our consolidated financial statements.

In connection with the Zipwhip acquisition, the Company recorded a net deferred tax liability which
provides an additional source of taxable income to support the realization of the pre-existing deferred tax
assets and, accordingly, during the year ended December 31, 2021, the Company released a total of
$15.9 million of its U.S. valuation allowance. The Company continues to maintain a valuation allowance
for its U.S. Federal and State net deferred tax assets.

In connection with the Segment acquisition, the Company recorded a net deferred tax liability which
provides an additional source of taxable income to support the realization of the pre-existing deferred tax
assets and, accordingly, during the year ended December 31, 2020, the Company released a total of
$13.8 million of its U.S. valuation allowance. The Company continues to maintain a valuation allowance
for its U.S. Federal and State net deferred tax assets.

In connection with the SendGrid acquisition, the Company recorded a net deferred tax liability which
provides an additional source of taxable income to support the realization of the pre-existing deferred tax
assets and, accordingly, during the year ended December 31, 2019, the Company released a total of
$55.0 million of its U.S. valuation allowance. The Company continues to maintain a valuation allowance
for its U.S. Federal and State net deferred tax assets.

133

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TWILIO INC.

Notes to Consolidated Financial Statements (Continued)

17. Income Taxes (Continued)

The provision for income taxes recorded in the years ended December 31, 2021 and 2020, consists

primarily of income taxes, withholding taxes in foreign jurisdictions in which the Company conducts
business and the tax benefit related to the release of valuation allowance from acquisitions. The
Company’s U.S. operations have been in a loss position and the Company maintains a full valuation
allowance against its U.S. deferred tax assets.

18. Subsequent Events

As described in Note 13(a), the Company was a party to a certain Framework Agreement, as
amended, and a Subscription Agreement pursuant to which the Company intended to purchase up to
$750.0 million in common stock of MBAC, subject to certain terms and conditions.

In February 2022, Syniverse, MBAC and the Merger Sub mutually terminated the Merger Agreement

and the related proposed Merger. The parties agreed to this termination because the rate of MBAC
shareholder redemptions for the proposed transaction would have exceeded the minimum cash condition
for closing, which occurred as a result of the recent changes in market conditions. Consequently, the
Company will not be purchasing any shares of common stock of, or making any investments in, MBAC.

Notwithstanding the above, the Framework Agreement between the Company, Syniverse and Carlyle
remains in full force and effect. Pursuant to the terms and subject to the closing conditions set forth in the
Framework Agreement, the parties are pursuing the alternative transaction, whereby the Company will
make a minority investment of $500.0 million to $750.0 million in Syniverse and the parties (or their
applicable subsidiaries) will enter into a wholesale agreement.

The transaction is expected to close in 2022.

134

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9A. Controls and Procedures

(a) Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and our Principal Financial

Officer, has evaluated the effectiveness of our disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) under the Exchange Act), as of the end of the period covered by this
Annual Report on Form 10-K.

Based on this evaluation, our Chief Executive Officer and our Principal Financial Officer concluded

that, as of December 31, 2021, our disclosure controls and procedures were effective to provide reasonable
assurance that information we are required to disclose in reports that we file or submit under the
Exchange Act is recorded, processed, summarized and reported within the time periods specified in the
SEC’s rules and forms, and that such information is accumulated and communicated to our management,
including our Chief Executive Officer and our Principal Financial Officer, as appropriate, to allow timely
decisions regarding required disclosures.

(b) Management’s Annual Report on Internal Control Over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over
financial reporting and for the assessment of the effectiveness of internal control over financial reporting
as defined in Rule 13a-15(f) and 15d-15(f) under the Exchange Act. Internal control over financial
reporting is a process designed under the supervision and with the participation of our management,
including our Chief Executive Officer and our Principal Financial Officer, to provide reasonable assurance
regarding the reliability of financial reporting and the preparation of financial statements for external
purposes in accordance with U.S generally accepted accounting principles.

Under the supervision and with the participation of our Chief Executive Officer and our Principal
Financial Officer and oversight of the board of directors, our management conducted an evaluation of the
effectiveness of our internal control over financial reporting as of December 31, 2021, based on the criteria
set forth in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of
the Treadway Commission (2013 framework). Based on this evaluation, management concluded that our
internal control over financial reporting was effective as of December 31, 2021.

On July 14, 2021 the Company acquired Zipwhip, Inc. (“Zipwhip”). Management excluded Zipwhip

from its assessment of the effectiveness of the Company’s internal control over financial reporting as of
December 31, 2021. Zipwhip’s total assets excluded from this assessment was $51.9 million, representing
0.4% of the Company’s consolidated total assets as of December 31, 2021, and Zipwhip’s total revenue of
$55.4 million represented 2% of the Company’s consolidated revenue for the year ended December 31,
2021.

The effectiveness of our internal control over financial reporting as of December 31, 2021 has been
audited by KPMG LLP, an independent registered public accounting firm, as stated in their report which is
included in Part II, Item 8, “Financial Statements and Supplementary Data”, of this Annual Report on
Form 10-K.

On July 14, 2021, the Company acquired Zipwhip. As a result of this acquisition, the Company is
reviewing the internal controls of Zipwhip and is making appropriate changes as deemed necessary. Except
for the changes in internal controls related to Zipwhip, there were no changes in our internal control over

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financial reporting in connection with the evaluation required by Rule 13a-15 (d) and 15d-15 (d) of the
Exchange Act that occurred during the quarter ended December 31, 2021, that materially affected, or are
reasonably likely to materially affect, our internal control over financial reporting.

(d) Inherent Limitations on Effectiveness of Controls

Our management, including our Chief Executive Officer and our Principal Financial Officer, does not

expect that our disclosure controls and procedures or our internal control over financial reporting will
prevent or detect all errors and all fraud. A control system, no matter how well conceived and operated,
can provide only reasonable, not absolute, assurance that the objectives of the control system are met.
Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute
assurance that all control issues and instances of fraud, if any, within the Company have been detected.
The design of any system of controls also is based in part upon certain assumptions about the likelihood of
future events, and there can be no assurance that any design will succeed in achieving its stated goals under
all potential future conditions. Over time, controls may become inadequate because of changes in
conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the
inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and
not be detected.

Item 9B. Other Information

Not applicable.

Item 9C. Disclosure Regarding Foreign Jurisdictions that Prevent Inspections

Not applicable.

136

Item 10. Directors, Executive Officers and Corporate Governance

PART III

The information required by this item is incorporated by reference to our Proxy Statement relating to

our 2022 Annual Meeting of Stockholders. The Proxy Statement will be filed with the Securities and
Exchange Commission within 120 days of the fiscal year ended December 31, 2021.

Codes of Business Conduct and Ethics

Our board of directors has adopted a Code of Business Conduct and Ethics that applies to all officers,

directors and employees, which is available on our website at (investors.twilio.com) under “Governance
Documents”. We intend to satisfy the disclosure requirement under Item 5.05 of Form 8-K regarding
amendments to, or waiver from, a provision of our Code of Business Conduct and Ethics and by posting
such information on the website address and location specified above.

Item 11. Executive Compensation

The information required by this item is incorporated by reference to our Proxy Statement relating to

our 2022 Annual Meeting of Stockholders. The Proxy Statement will be filed with the Securities and
Exchange Commission within 120 days of the fiscal year ended December 31, 2021.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

The information required by this item is incorporated by reference to our Proxy Statement relating to

our 2022 Annual Meeting of Stockholders. The Proxy Statement will be filed with the Securities and
Exchange Commission within 120 days of the fiscal year ended December 31, 2021.

Item 13. Certain Relationships and Related Transactions and Director Independence

The information required by this item is incorporated by reference to our Proxy Statement relating to

our 2022 Annual Meeting of Stockholders. The Proxy Statement will be filed with the Securities and
Exchange Commission within 120 days of the fiscal year ended December 31, 2021.

Item 14. Principal Accountant Fees and Services

The information required by this item is incorporated by reference to our Proxy Statement relating to

our 2022 Annual Meeting of Stockholders. The Proxy Statement will be filed with the Securities and
Exchange Commission within 120 days of the fiscal year ended December 31, 2021.

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137

PART IV

Item 15. Exhibits and Financial Statement Schedules

(a) The following documents are filed as part of this report:

Financial Statements

See Index to Financial Statements at Item 8 herein.

Financial Statement Schedules

Schedules not listed above have been omitted because they are not required, not applicable, or the

required information is otherwise included.

3. Exhibits

The exhibits listed below are filed as part of this Annual Report on Form 10-K or are

incorporated herein by reference, in each case as indicated below.

138

Exhibit
Number

2.1

2.2

2.3

3.1

3.2

4.1

4.2

4.3

4.4

4.5

EXHIBIT INDEX

Description

Form

File No.

Exhibit

Filing Date

Incorporated by Reference

Agreement and Plan of Merger and
Reorganization, dated as of May 16, 2021,
by and among Twilio Inc., a Delaware
corporation, Zeus Merger Sub I, Inc., a
Delaware corporation, Zeus Merger Sub
II, LLC, a Delaware limited liability
company, Zipwhip, Inc., a Delaware
corporation and Fortis Advisors LLC, a
Delaware limited liability company

Agreement and Plan of Reorganization,
dated October 12, 2020, by and among
Twilio Inc., a Delaware corporation,
Scorpio Merger Sub, Inc., a Delaware
corporation, Segment,io, Inc., a Delaware
corporation, and Shareholder
Representative Services LLC, a Colorado
limited liability company

Framework Agreement Letter Agreement,
dated as of August 16, 2021, by and among
Twilio Inc., a Delaware corporation,
Carlyle Partners V Holdings, L.P., a
Delaware limited partnership, and
Syniverse Corporation, a Delaware
corporation

Amended and Restated Certificate of
Incorporation of Twilio Inc.

Second Amended and Restated Bylaws of
Twilio Inc.

Form of Class A Common Stock
Certificate of Twilio Inc.

Amended and Restated Investors’ Rights
Agreement, dated April 24, 2015, between
Twilio Inc. and certain of its stockholders

Indenture, dated as of May 17, 2018,
between Twilio Inc. and Wilmington
Trust, National Association, as trustee

Form of 0.25% Convertible Senior Notes
due 2023 (included in Exhibit 4.3)

Indenture, dated as of March 9, 2021 by
and between Twilio Inc. and U.S. Bank
National Association, as Trustee

139

10-Q 001-37806

2.1

July 30, 2021

S-3

333-249889

2.1

November 5, 2020

8-K

001-37806

2.1

August 17, 2021

S-1A 333-211634

3.1

June 13, 2016

10-Q 001-37806

3.1

August 4, 2020

S-1

333-211634

4.1

May 26, 2016

S-1

333-211634

4.2

May 26, 2016

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8-K

001-37806

4.1

May 18, 2018

8-K

001-37806

4.2

May 18, 2018

8-K

001-37806

4.1

March 9, 2021

Description

Form

File No.

Exhibit

Filing Date

Incorporated by Reference

First Supplemental Indenture, dated as of
March 9, 2021, between Twilio Inc. and
U.S. Bank National Association, as
Trustee

Form of 3.625% Senior Notes due 2029

Form of 3.875% Senior Notes due 2031

Description of the Registrant’s Securities
Registered Pursuant to Section 12 of the
Securities Exchange Act of 1934

8-K

001-37806

4.2

March 9, 2021

8-K

001-37806

10-K 001-37806

4.3

4.4

4.5

March 9, 2021

February 26, 2021

Form of Indemnification Agreement

10-K 001-37806

10.1

10.2

February 26, 2021

Exhibit
Number

4.6

4.7

4.8

4.9

10.1*

10.2*

10.3*

10.4*

10.5*

10.6*

10.7*

10.8*

Twilio Inc. Amended and Restated 2008
Stock Option Plan and forms of Stock
Option Agreement and form of Stock
Option Grant Notice

Twilio Inc. Amended and Restated 2016
Stock Option and Incentive Plan, and
forms of Agreements thereunder

Twilio Inc. 2019 France Sub-Plan to the
2016 Stock Option and Incentive Plan

Segment.io, Inc. Fifth Amended and
Restated 2013 Stock Option and Grant
Plan and related form agreements

SendGrid, Inc. Amended and Restated
2012 Equity Incentive Plan

SendGrid, Inc. Amended and Restated
2017 Equity Incentive Plan

Twilio Inc. Amended and Restated 2016
Employee Stock Purchase Plan

10.9*

Zipwhip, Inc. 2018 Equity Incentive Plan

10.10*

10.11

10.12

10.13

Zipwhip, Inc. Amended and Restated 2008
Stock Plan

Office Lease, dated January 8, 2016, as
amended January 8, 2016, between
Twilio Inc. and Bay Area Headquarters
Authority

Sublease, dated as of August 30, 2018, by
and between Salesforce.com, Inc. and
Twilio Inc.

Consent to Sublease Agreement, dated as
of September 25, 2018, by and among
Hudson Rincon Center, LLC,
Salesforce.com Inc. and Twilio Inc.

140

10-K 001-37806

10.3

February 26, 2021

10-Q 001-37806

10.2 October 31, 2019

10-K 001-37806

10.5

February 26, 2021

10-K 001-37806

10.6

February 26, 2021

10-K 001-37806

10.7

February 26, 2021

10-Q 001-37806

10.1 October 31, 2019

S-8

333-211634

99.1

99.2

August 2, 2021

S-1

333-211634

10.6

May 26, 2016

10-Q 001-37806

10.1 November 8, 2018

10-Q 001-37806

10.2 November 8, 2018

Exhibit
Number

10.14*

10.15*

10.16*

10.17*

10.18*

10.19*

Description

Form

File No.

Exhibit

Filing Date

Incorporated by Reference

Offer Letter with Khozema Shipchandler,
dated August 20, 2018

Offer Letter with Marc Boroditsky, dated
October 25, 2021

Offer Letter with Eyal Manor, dated
October 13, 2021

Offer Letter with Dana Wagner dated
October 7, 2021

Chief Executive Officer Severance Plan
dated March 28, 2018 and form of
participation letter

Key Executive Severance Plan, dated
March 28, 2018 and Form of Participation
Letter

8-K

001-37806

10.1 October 25, 2018

Filed herewith

10-Q 001-37806

10.1

May 10, 2018

10-Q 001-37806

10.2

May 10, 2018

10.1

May 18, 2018

May 6, 2021

Filed herewith

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Furnished herewith

10.20

Form of Capped Call Confirmation

8-K

001-37806

10-Q 001-37806

10.21+†

21.1

23.1

31.1

31.2

32.1**

Framework Agreement by and among
Twilio Inc., a Delaware corporation,
Carlyle Partners V Holdings, L.P., a
Delaware limited partnership, and
Syniverse Corporation, a Delaware
corporation, dated as of February 26, 2021

List of Subsidiaries of the Registrant

Consent of KPMG, LLP, Independent
Registered Public Accounting Firm

Certification of the Chief Executive
Officer pursuant to Exchange Act
Rules 13a-14(a) and 15d-14(a), as adopted
pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002

Certification of the Chief Operating
Officer (Principal Financial Officer)
pursuant to Exchange Act
Rules 13a-14(a) and 15d-14(a), as adopted
pursuant to Section 302 of the Sarbanes-
Oxley Act of 2002

Certification of the Chief Executive
Officer and Chief Operating Officer
(Principal Financial Officer) pursuant to
18 U.S.C. Section 1350, as adopted
pursuant to Section 906 of the Sarbanes-
Oxley Act of 2002

141

Exhibit
Number

101.INS

101.SCH

101.CAL

101.DEF

101.LAB

101.PRE

104

Description

Form

File No.

Exhibit

Filing Date

Incorporated by Reference

Inline XBRL Instance Document—the
instance document does not appear in the
Interactive Data File because its XBRL
tags are embedded within the Inline
XBRL document

Inline XBRL Taxonomy Extension
Schema Document.

Inline XBRL Taxonomy Extension
Calculation Linkbase Document.

Inline XBRL Taxonomy Extension
Definition Linkbase Document.

XBRL Taxonomy Extension Label
Linkbase Document.

Inline XBRL Taxonomy Extension
Presentation Linkbase Document.

Cover Page with Interactive Data File
(formatted as Inline XBRL with applicable
taxonomy extension information contained
in Exhibits 101).

Filed herewith

+ Schedules and other similar attachments have been omitted pursuant to Item 601(b)(2) of Regulation
S-K. The registrant hereby undertakes to furnish supplemental copies of any of the omitted schedules
and other similar attachments upon request by the Securities and Exchange Commission.

†

Certain portions of this exhibit have been omitted because they are not material and they are the type
of information that the registrant treats as private or confidential.

Indicates a management contract or compensatory plan or arrangement.

** The certifications furnished in Exhibit 32.1 hereto are deemed to accompany this Annual Report on
Form 10-K and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act
of 1934, as amended, except to the extent that the registrant specifically incorporates it by reference.

Item 16. Form 10-K Summary

None.

142

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, as

amended, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto
duly authorized.

February 22, 2022

Twilio Inc.

/s/ JEFF LAWSON
Jeff Lawson
Director and Chief Executive Officer (Principal
Executive Officer)

/s/ KHOZEMA Z. SHIPCHANDLER
Khozema Z. Shipchandler
Chief Operating Officer (Principal Accounting and
Financial Officer)

/s/ RICHARD L. DALZELL
Richard L. Dalzell
Director

/s/ BYRON B. DEETER
Byron B. Deeter
Director

/s/ ELENA A. DONIO
Elena A. Donio
Director

/s/ DONNA L. DUBINSKY
Donna L. Dubinsky
Director

/s/ JEFF EPSTEIN
Jeff Epstein
Director

/s/ JEFFREY R. IMMELT
Jeffrey R. Immelt
Director

/s/ DEVAL L. PATRICK
Deval L. Patrick
Director

/s/ ERIKA ROTTENBERG
Erika Rottenberg
Director

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Leadership

Management

Jeff Lawson
Co-Founder, CEO & Chairperson

Michael Buckley
VP of Communications

Lybra Clemons
Chief Diversity Officer

Elena Donio
President of Revenue

Simon Khalaf
SVP & GM Communications
Platform

Christy Lake
Chief People Officer

Eyal Manor
Chief Product Officer

Erin Reilly
Chief Social Impact Officer

Khozema Shipchandler
Chief Operating Officer

Reeny Sondhi
Chief Digital Officer

Aidan Viggiano
SVP, Finance

Dana Wagner
Chief Legal Officer

Glenn Weinstein
Chief Customer Officer

Board of Directors

Jeff Lawson
Co-Founder, CEO & Chairperson

Rick Dalzell
Former SVP & CIO
Amazon

Byron Deeter
Partner
Bessemer Venture Partners

Donna Dubinsky
CEO and Board Chair
Numenta

Jeff Epstein
Former CFO
Oracle

Jeff Immelt
Venture Partner
New Enterprise Associates

Deval Patrick
Former Governor
of Massachusetts

Erika Rottenberg
Former VP & General Counsel
Chan Zuckerberg Initiative

Auditors

KPMG LLP

Transfer agent & registrar

Computershare Trust Company, N.A.

twilio.com
twilio.com