Twilio Inc. (TWLO) Earnings Call Transcript & Summary

Yes. That's a good question. So I would start by saying you probably saw the press release this morning where we announced Deloitte as a GSI. So for example, it's pretty important for us to be able to attract a partner with that kind of clout in the marketplace that can now work with us. And I think that is some level of validation that the kinds of features and functionality that we have not just with Flex but our other products and services have reached a point where a notable GSI... [Audio Gap]

So many issues. Clearly, that's a problem there, but we'll keep going. So I think you were talking about Deloitte and what it's like to have a GSI and what it means for you guys.

Yes. So it's obviously great to be able to sign up a GSI like that. And I think it is some level of validation that features and functionality are kind of getting there in terms of what one of the big guys would really expect. I think it's one of these things where we're never going to be done. I mean obviously, there is like still a fair amount of work to do to be able to catch up to an on-prem product that's been in the marketplace for 20, 30 years. But we feel great about where Flex is positioned today. And I think based on some of the logos that we've actually been able to talk about and some of the Fortune 50 names, even anonymous names that we've been able to talk about during the last several calls, we feel great about where the adoption is headed. I'll tell you this as well, Rishi, that the energy and the interest in Flex from an inbound perspective alone has never been higher in -- than in the history of the product today. And so we're incredibly excited about that. Now in the way that, that ends up translating to revenues and sales cycles, I don't know that it's going to dramatically impact that. I mean it does -- it is obviously going to accelerate it a little bit. But the reality is, is that these sales cycles take time. And if you're a huge retailer or a financial services provider that's running 20,000 agents off of your existing, you're probably going to slice off a line of business, for example, and give that to us. So you're going to graduate from 500 agents initially to 5,000 to 10,000 and then beyond. So I think that's kind of the dynamic that we anticipate playing out. But we feel really good about where the product is. I mean, again, a little bit lucky in terms of COVID and the way that it's impacted Flex. I wouldn't necessarily have wanted it to play out that way, but I think we find ourselves in a really fortunate spot. And we've got the right product certainly at the right time, and I think there's a lot that we're going to be able to win over the next several months to validate our ongoing belief in that product.

All right. Great. All right, I got an investor question, so I'll jump to that one. Just following up a little bit on the contact tracing thing. "Does that mean that there's potential other areas to expand kind of in that government sector like going government to constituent communications?"

I do think that, that's kind of where we see it going. I mean so there's different tiers to that, right? So there's federal government. And you've got to be FedRAMP certified to be able to do business at sort of the federal level, and we're in the process of -- it'll be a couple of years, but there are stages to being FedRAMP qualified. And I think you're aware that we've done some business, for example, with the VA in the past. So I think national government level, we feel pretty good about what we're going to be able to do there over the next couple of years. We're already doing some work there initially. I think with the state, city, municipality level, we're quite excited about the ways in which we think governments are going to want to be able to reach their constituents. I mean you already see it happening a little bit in terms of tax transactions. You've certainly seen a little bit of it with respect to election validations. I'm sure we'll talk about political traffic in a moment. There's other use cases where I think cities and states want to be able to interact with their constituents in a way in which it's not political per se, it's just getting them information that they need from a civic perspective. I know I certainly get some private alerts, for example, right now just given kind of the fire dynamic in Northern California right now and I think citizens, states and fire departments, police departments want to be able to get that kind of comms out, too. So I do think once we get through contact tracing and some of the urgency around that particular effort and use case, there's going to be a lot more that opens up. And then obviously, you've got hospitals, which kind of fall into kind of a mix between private as well as mostly public, especially with municipalities. And we're already HIPAA certified, and we've got high trust. And so we feel great about our ability to do business with health care providers. And so I think you're just going to see more of that as we go.

Of course, I mean, you're always one step ahead of me in the question, so let's go straight into the political stuff. Just how should we be thinking about contribution from the November Presidential election, I mean we're 2 months away from that now, right, especially since we can't have or shouldn't have in-person rallies in this environment, but that may still happen, and I think especially with the context of how much upside you got in 2018 from just the midterm elections?

Yes. I think it's a good question. It's less than you might think, and there's 2 dynamics there. I think, one, I mean, you're absolutely right. I mean there definitely is some transition from what would otherwise happen in-person is now happening over the Internet. The countervailing kind of circumstances is that based on a lot of the messages that were delivered back in that 3Q, 4Q '18 time frame, there was a fair amount of voter uproar over unwanted messages. And we certainly want to be on the right side of that where we're only sending messages to constituents that actually want to receive them from candidates from whom they want to receive them. And so there's an opt-in dynamic today that didn't exist back then. And so I think to some degree, that is going to mute volumes. I don't think it's going to be as material certainly on a percentage revenue contribution basis as it was 2 years ago. Two years ago, it turned out to be an extraordinary spike so much so that we actually called it out as a particular contributor because we think it -- we thought then it kind of -- it spiked our results a little bit in a way that we actually didn't think was representative. I don't think we quite see it the same way this year, but it's still early in the election cycle. And I think in the last, whatever it is, less than 50 days here until that final day, there probably is going to be an increase in interactions. It's just -- it's not obvious to me that, that translates into revenue for us.

Yes. Yes, got it. All right, I want to talk a little bit more partner-wise. So we talked about SIs and the potential there. But I'm interested on the other side of the equation, which is with ISVs, right? Obviously, you're an API company, so that lends itself to that. But can we see the rise of more companies like Talkdesk, right, which is a $3 billion valuation company built on Twilio? Like how are you thinking about that kind of partner ecosystem?

Yes. I mean we have a number of customers that basically act as ISVs, and I think you correctly characterized one of them. We have a number of others that -- it's a very kind of symbiotic relationship where they use parts of our stack, we use, in some cases -- not all but in some cases, parts of their stack. And they're able to build and grow their business off of us that obviously drives some usage for us. And then they have some additional kind of higher-stack, value-added items that they're able to offer as well. And -- but we love that relationship. I mean I think when you consider ISVs, I mean, most of these companies have deep developer bases. So they're very much like-minded in terms of their approach and our approach to the world from a technology and developer perspective. And if we can continue to grow that portion of the ecosystem, I think that would be fantastic. I wouldn't limit our efforts just to ISVs. I mean obviously, kind of these niche partners, boutique partners, if you will, that we've been able to cultivate in certain areas particularly on certain geographies and products have been really beneficial to us. And then I think over time, we're going to want to grow into some more of these bigger partnerships like a GSI like Deloitte, where they're able to take products like Flex and other places that we intend to go in terms of our customer engagement stack and bring those solutions to market and build the business on top of that. We don't necessarily want to have like a huge proserve business. We'll do a little bit of that for white glove customers. But otherwise, we'd love for other companies to be really successful off of our APIs and make a ton of money themselves.

Okay. Got it. I mean that's great. All right, I got another investor question. I want to ask this one because I know it's obviously important to you and clearly to Jeff based on his commentary on the call, which is, "During these challenging times, what is Twilio doing to support employees, their families and the communities?"

Yes. It's a great question. So the first thing is, is that we were, I think, the -- if not the first, certainly one of the first companies to send our workforce to entirely work from home. We saw some signals early on, and I don't know if we were overly clairvoyant or not, but we sent our workforce home virtually immediately to be able to accommodate what we thought was a really rapidly evolving dynamic. Having done that, we immediately issued what I think is probably one of the most generous stipends for employees to develop a home office setup. We offer $1,500 for every single one of our employees. They can avail themselves of that for whatever purpose they need. I mean it could be buying a standing desk or a chair. Or they could use it -- in some warmer parts of the world, they've used it for air conditioning and stuff like that. That was all in the early days. And I think what's -- so that -- we're talking like first couple of months. And I lead the effort, by the way, so I have some first-hand knowledge here. So the -- what's transpired over the summer and I think more recently, and it certainly kind of doubled down with some of the smoke dynamics, particularly in Northern California, is as children have gone back to school, we're certainly starting to see, as many other companies are, stress in the workplace in terms of working parents. There are others who are taking care of elderly folks. There are young people who are just feeling very isolated. And so we provide a broad array of mental health services. We've also opened up a relationship with a caregiving company where we provide a free subscription so that our employees can avail themselves of that. We've extended employee leave for not just working parents but for all employees that need it for caretaking or mental health purposes. And we regularly survey our employees in terms of how are they doing, are they able to remain productive, how are they feeling from a mental health and kind of fatigue perspective. And I think by and large, we've gotten really positive inputs from our teams. I mean I think our survey results have been fantastic. I communicate on kind of what's going on and when it's going on, et cetera, with our employees. I was doing it on a weekly basis. We've since moved that to kind of monthly as -- I can't even believe I'm saying this, but COVID has sort of become normal in a way or working from home has become normal. And then I guess the last thing I would just add is we've allowed our employees to work from home on whatever terms they decide through August of 2021. And frankly, we've already communicated to our employees that, but for one of our Northern European offices, we don't anticipate any of our offices opening until probably January.

And that's super helpful. I'm really glad to hear that being done. Okay. Twilio employees I have talked to will absolutely back up what you're saying. Khozema, thank you so...

And then, I mean...

Sorry, go ahead, go ahead.

I'm sorry, there was one part of your question I didn't answer. I mean -- sorry, the one part of your question that I didn't answer is in terms of the communities. We've been very active from a dialogue perspective. We've been very active with respect to BLM both in terms of supporting organizations but also providing services for our employee base internally. Clearly, that's been the kind of the social injustice movement inside the United States. It's been a particular stressor, and we've done a lot to help employees and community organizations at large. And I personally support a number of nonprofit organizations in that regard, too.

Thank you because I really appreciate that. And really appreciate the time. This has been super helpful. So thank you so much.

Sure.

All right. Take care. Bye.

Thank you.