Twilio Inc. (TWLO) Earnings Call Transcript & Summary

All right, everyone. Thank you for joining us today. This is Andrew Zilli, Head of Investor Relations and Treasury here at Twilio. Thanks for joining us for our Investor Day during SIGNAL 2020, which as many of you know, is our very first virtual SIGNAL event. Hopefully, you were able to tune into Just Keynote yesterday where we highlighted Nike's amazing use of Flex. We showed how Mount Sinai is transforming health care to be digitally driven and virtual first, combining SMS and video. And we introduced Twilio Frontline to empower employees to engage with customers over multiple channels, all via a single mobile app. Now we know it's been a few years since we last held an Analyst Day, and quite a lot has changed. We're excited to have you join us today. Keep in mind that we just closed our third quarter. And as we're still closing the books ahead of earnings, much of our conversation today will be based on data available through the second quarter. Additionally, following this event, we will be in our quiet period until we report earnings later this month, so we won't be able to host any calls until after we report, and we appreciate your understanding in this. Now everybody's favorite slide. As you all know, we are a publicly traded company. Keep in mind that some of our commentary today will be in non-GAAP terms. Reconciliations between our GAAP and non-GAAP results and guidance can be found in our most recent earnings press release as well as the appendix of this presentation that will be available on our Investor Relations website following the event. Additionally, some of our discussion and responses may contain forward-looking statements, which are subject to risks, uncertainties and assumptions. In particular, our expectations around the impact of the COVID-19 pandemic on our business, results of operations and financial condition and that of our customers and partners is subject to change. Should any of these risks materialize or should our assumptions prove to be incorrect, actual financial results could differ materially from our projections or those implied by these forward-looking statements. A description of these risks, uncertainties and assumptions and other factors that could affect our financial results are included in our SEC filings, including our most recent report on Form 10-K and subsequent reports on Form 10-Q. And our remarks during today's discussion should be considered to incorporate this information by reference. Forward-looking statements represent our beliefs and assumptions only as of the date such statements are made. We undertake no obligation to update any forward-looking statements made during this call to reflect the events or circumstances after today or to reflect new information or the occurrence of unanticipated events, except as required by law. So here's the agenda we have planned for today. We're going to kick things off with Khozema Shipchandler, our CFO, who will take you through our presentation. And we'll follow that with a moderated Q&A. We'll then welcome George Hu, our COO, for a Q&A session, and we'll wrap up with Jeff Lawson, our Co-Founder and CEO, for a Q&A session. For those of you on the Zoom webinar, we'll be using the built-in Q&A feature. [Operator Instructions] I will moderate the Q&A by announcing who submitted the question, and then we'll read out the question for the group. So with all of that out of the way, let me go ahead and hand it over to Khozema to kick things off.

Thanks, Zilli, and thanks to everybody for joining today. We'll be sharing a lot of financial detail with you today. But since we're doing this as a part of SIGNAL, there are also a lot of excellent product features as well as some lighthearted features that I would strongly encourage you to view when you have some time. They're all located on our website and should be available for on-demand viewing. But without further ado, let's dig into the numbers. It's been a while since we've done one of these, so we thought what we would do is start by looking at where we were at our last Investor Day. At that time, we reported $115 million in revenue, 123% DBNE, 49,000 active customers and nearly 2 million developer accounts. Since then, we've quadrupled our revenue, increased our expansion rate, grown our active customers to more than 200,000, and as you may have heard in Jeff's keynote yesterday, we now have more than 10 million developer accounts on our platform. We've consistently delivered outstanding growth across every dimension of the business over the last 2.5 years. During this time frame, based on thousands of interactions with developers and deep discovery with our customers, it has become clear that customer engagement has never been more important, and that is the driving force behind the demand for our platform. In fact, according to Gallup Analytics, companies see a 23% premium from engaged customers in terms of wallet share, profitability, revenue and relationship growth compared to an average customer. This is why companies are accelerating their digital transformation efforts and why they want to work with Twilio to drive their customer engagement strategies. And these trends are driving a large and growing addressable market for us. When Twilio went public, we stated then that our programmable messaging, voice, video and authentication products addressed portions of a $45 billion market. Since then, we've added e-mail and marketing campaigns via SendGrid. We've added Flex to take on the enterprise cloud contact center market. We've added IoT to help companies connect devices anywhere in the world. In addition to growing in the markets in which the company started, expanding our platform with these additional products gives us a $62 billion TAM today. And with these same products by 2023, it is estimated our addressable market will be $87 billion. And you can see that the growth comes across all of our product lines. We have a tremendous opportunity ahead of us, and we're just getting started. And we're addressing that market with our leading customer engagement platform. From the Super Network to our APIs, to products like Flex, our platform provides 3 things that companies need: digital engagement, software agility and cloud scale. Companies across industries and around the world are using our platform to power the next generation of customer engagement solutions. The use cases are nearly endless when it comes to how our customers are using our platform from marketing to customer service to IT alerts and more. Our platform allows companies to get to market faster with personalized content over any channel in a global scale. In fact, we offer our products in more than 180 countries. In the last year, we powered nearly 1 trillion human interactions. And in order to make this happen, our R&D teams work relentlessly to release new features and deployments, many of which are based on feedback from our outstanding developer community. And in the last year, our team delivered 180,000 production deployments, which is just incredible. But as you all know, it takes more than just good products to create a valuable company. We've built an extremely talented management team with diverse backgrounds across the technology spectrum from some of the largest enterprises to systems integrators, to the military and more. This year, we've expanded our management team by adding some great new talent, including Lybra Clemons, Chief Diversity, Inclusion and Belonging Officer; Michelle Grover as our first CIO; Christy Lake, as our new Chief People Officer; Steve Pugh as our CSO; and Glenn Weinstein as our Chief Customer Officer. And importantly, 10 of these leaders have experience at companies with more than $5 billion in revenue and bring important experience to Twilio as we continue to scale. So let's take a look at the results we've delivered and dig into some more of our metrics a bit more. We have consistently delivered strong revenue growth at scale. Since Q4 '17, we've delivered a 60% CAGR and have more than quadrupled our quarterly revenue. We continue to see broad-based strength and have experienced a modest tailwind from COVID as businesses look to digitally transform. While COVID has accelerated digital adoption in certain industries, we think these use cases will prove resilient over time. And negatively affected industries, while hard to call in terms of timing, should also provide a tailwind to the business as they rebound over time. And that strength continued in the third quarter. While we obviously just concluded the quarter yesterday, and we'll be working on closing the books ahead of earnings over the next few weeks, we are expecting third quarter revenue to come in ahead of the high end of our previously issued guidance. As we've talked about previously, COVID-19 has been a net tailwind for Twilio. Over the last few months, we've seen years-long digital transformation road maps compressed into just days and weeks. In fact, in a recent Twilio global survey of more than 2,500 enterprise decision-makers, respondents indicated that COVID-19 has accelerated companies' digital communication strategies by an average of 6 years, and almost all companies are now seeking ways of engaging customers. Our customers across nearly every industry have had to identify new ways to communicate with their customers and stakeholders, and we've seen new use cases like remote contact centers, self-service, to contactless delivery, telehealth, distance learning and more. The new and accelerating forms of customer engagement resulting from COVID-19 are adding to the secular tailwinds which have long propelled our growth. We have a different model than many software companies, which is primarily based on the usage of our products. And it's this usage-based model that allows for very little friction for customers during the adoption phase. In Q2, 76% of our revenue was usage-based, coming from messaging, voice minutes, video and others. The remainder was from nonusage-based products like Flex seats, enterprise plans, phone numbers, support and others. Importantly, you'll notice that both e-mail and Flex fall under both categories as e-mail has packages that are nonusage and overages that are usage. And Flex has a seat-based pricing option that is nonusage as well as a usage-based component for agent hours. In general, the bias of our revenue model to usage means that we win when our customers win. When you further break down our revenue and look at telephony-based voice and messaging usage, the split is even more distributed. So while our reported international revenue based on our SEC definition accounting for company headquarters was 27% of total, for example, in Q2, you can see that our revenue split based on where we are sending messages and terminating voice minutes is actually about 50-50. This impacts our gross margins as international markets tend to have a lower gross margin profile than the U.S., which we will talk about shortly. In addition to geographic diversity, our business is diversified across industries. This is a select group of industries that are representative of the broad reach we have. It's probably no surprise that IT-oriented companies represent the largest vertical for us, but we also have a great presence in verticals like financial services, entertainment and consumer on-demand. You may recall that we announced HIPAA compliance for several of our products earlier this year and the ability to sign business association agreements, commonly known as BAAs. Health care is a huge opportunity for us, and we've already signed more than 240 BAAs this year alone. I'd also like to highlight one other area, and that's political revenue. We know this is an area of investor interest, so we wanted to make sure everyone was aligned on the contribution of this category to revenue, which was roughly 1% in Q2. So while the dollars are growing, the rest of our business has grown so much faster that it isn't as significant of a contributor as it was in 2018. And while we do expect this to tick up modestly in Q3 and Q4, it is not growing as quickly as the rest of our business, and we expect that it will remain a relatively small percentage of our total revenue. We also continue to diversify our business across customer size. Growth customers, which we define as companies with less than 100 employees, were 36% of revenue in Q2. Mid-market was 28%, and enterprise companies, which are companies we define as having more than 2000 employees, is 36%. This is up from 32% back in Q4 2017, so we're making good progress here as we expand our presence at the enterprise level. And our business is diversified across our product set. We've continued to expand our product offering over the last several years, adding Flex, e-mail and many others. And you can see that application services, which includes products like Flex, Authy, video and many others, continues to grow as a percentage of our overall revenue. When you combine that with e-mail, those high-margin products now represent about 28% of our revenue through the first half of the year. But more importantly, you may have noticed that messaging has become a higher percentage of revenue in the first half than where it was in 2019. So let's take a closer look at the growth of the messaging product. Messaging is a bigger percentage of revenue this year than last year. Excuse me. And that's because our messaging growth is actually reaccelerating at a very large scale. In fact, we've already sent nearly as many messages in the first half of this year as we did in all of 2017 and 2018 combined. Of course, COVID has played some role in this, but customer engagement via messaging is becoming more and more important. And we are helping companies embrace this channel to provide a better experience for their customers. And this is a great sign. Our biggest product is reaccelerating at a large scale. But as we'll discuss a bit later, this is also driving some near-term gross margin pressure, a dynamic that we gladly accept in the near term. Moving to look at our application services. This bucket of products is growing much faster than the core, and we have a range of products within this portfolio. Video, to no surprise to anyone who has been listening to our earnings calls, is growing extremely fast at nearly 600% for the first half of the year. Of course, it is growing off of a small base, but we are excited about our opportunity to build that into a significant revenue driver for the company. As I mentioned earlier, our core messaging business has also accelerated at scale. Additionally, there are subcomponents of messaging within software that are growing even faster. Some examples of this are product like the WhatsApp API, conversations, insights and others. We're excited about the growth opportunities here as customers look to engage across a myriad of messaging channels. Next is our engagement cloud, growing at 94% year-over-year. This includes not only Flex, which we'll provide more details on shortly, but other products like Authy, Lookups, Proxy, Studio and more. Lastly, other application services includes a variety of other products that are more mature, hence, growing at a slower rate. Some of these products include recordings, storage, voice software, enterprise and support plans and a few others. Speaking of Flex. We continue to release new features to the Flex platform at a blistering pace. It's important to note that we are not focused on reaching feature parity with the legacy vendors. They have been amassing features for 3 decades, and a majority of those features are actually never used. And regardless, the legacy platforms we're disrupting are not flexible nor scalable. Instead, we are providing customers the features they want and need with building blocks in the cloud on a flexible platform where companies can build and own their own road map. Customers are buying our platform to allow them to grow beyond the contact center and think about customer care more holistically. In the first half of the year, Flex revenue was up 184%, far ahead of our total revenue growth rate. While it is clearly growing very well, it remains a relatively small percentage of revenue compared to products like messaging and voice. So we aren't breaking out the dollars separately. We have more than 600 customers using Flex today, and that number just continues to grow. In fact, let me talk about a deal we just signed in the third quarter, which is one of our largest Flex deals to date, with a Fortune 100 insurance company. They were using an on-premise vendor with plans to move to the cloud sometime in early 2022. However, in response to COVID, that transition was significantly accelerated. It was made even more urgent when their legacy vendor wanted to charge them for more remote functionality. We had a relationship with them previously and had built up trust, and they turned to us for more than 5,000 full-time agents and a similar number of part-time gig workers. Our platform allows them to customize what they need from a feature standpoint and a pricing standpoint, and they moved very quickly. This is what makes Flex such a powerful platform, and why we continue to be extremely excited about what this product will do for us over time. I also wanted to give you an update on the SendGrid e-mail business. We closed the acquisition of SendGrid in February 2019 and delivered a great year of results in that year. But importantly, we've accelerated the growth of the product as part of the Twilio family. In the year prior to acquisition, SendGrid was growing 31%. And through the first half of 2020, we accelerated that to 36%. We've also grown the DBNE since acquisition as we've expanded the reach of the product with our go-to-market team. We are very happy with our execution on this acquisition, and it has brought an incredibly important channel to our customer engagement platform. We've also continued to grow our customer base, adding more than 20,000 customers in the first half of this year. Keep in mind that the customers we have signed this year don't necessarily yet impact dollar-based net expansion and won't until we lap them next year. We are building a diversified customer base across regions, industries and customer size. As we continue to land and expand, this customer base becomes an extremely important asset for us over time. And we're becoming much more strategic. As you can see, we've more than doubled the number of customers who paid us $100,000 in the last 12 months. We've nearly tripled the number of customers who paid us more than $1 million. We've grown the $5 million bucket by 5x and more than tripled the companies who paid us more than $10 million in the last 12 months. All of this shows that our customer engagement platform is becoming more strategic to a broader set of customers. This is a fantastic trend, and especially at the higher end, a positive sign of our enterprise traction. And speaking of the enterprise, we've talked about increasing our presence in the enterprise as an important area of investment for us. So when you look at the largest of enterprises in the G2K, you can see we've grown the customer count by 39%. But more importantly, we've grown our revenue from G2K customers by 650%. Our go-to-market team is executing extremely well and helping us grow our footprint. It is important to note that while we've seen great traction here, we still have less than 20% of the G2K as customers today. It's still early for what we believe is a massive opportunity ahead of us. Continuing to move upmarket has other benefits as well, as you can see that our revenue churn remains extremely low, consistently below 4% over the last 2.5 years for customers paying us more than $30,000 and $100,000 monthly. Our focus on delivering the features and products that our customers are asking for with a highly reliable and scalable platform drive success for our customers, who, in turn, use our platform more and keep our churn low. And as customers use more and more of our platform, it drives our strong dollar-based net expansion, which ended Q2 at 132%. As you all know, this isn't a number we forecast or guide to, but it does show that our land and expand approach is working. So let's take a closer look at what makes up the expansion. You can see that increasing usage is still a majority of the driver of expansion. So that's customers sending more messages or using more voice minutes. But we're also seeing improvement in the expansion driven by new products. I should point out that when we talk about new products here, it's at the high level of how we describe our products. So this would be a messaging customer taking on Flex or voice or video rather than an SMS customer adding a new region. So overall, this is a good trend to see in that we're able to expand through both options. And in most cases, as we sell a new product, it will then drive that additional usage. Importantly, Twilio's business model starts with the developers. We were founded by 3 software developers. And since day 1, we have been focused on being developer first and making our platform easy and accessible for the developers of the world to embed communications into their applications with very little friction and very low upfront cost. This slide is an illustration of how one customer scaled with Twilio. And we see that with many of our customers, they follow up a similar trajectory. In the first phase, a developer signs up for Twilio with little or no upfront costs and builds a prototype and watches as usage starts to scale. This is how we "land." Developers start with one application or solve one small problem, and customers quickly increase their usage as they start rolling out more broadly. And then this developer may want to add more capabilities and enable more solutions for their customers. And this is how we "expand." Our platform enables software developers to easily add a broad suite of communications tools to their existing applications, which are then made available to all of their customers. And as they use more, we earn more revenue. And so as a result, when our customers succeed, we succeed. And here you see the combination of our new customer additions, the land piece, and our high DBNE, which is the expand piece. Customers join our platform, stay on the platform and continue to grow. And that trend has continued with the 2020 cohort, which is outpacing all recent years. We get customers on the platform. They stay on the platform and continue to grow as they expand their usage, add new products and add new use cases. But we can't do all of this on our own, and we have built a great partner ecosystem to expand our reach. Today, we have more than 300 partners in our partner program. And as I'm sure many of you saw, just a couple of weeks ago, we added our first GSI with Deloitte Digital. Partners play a critical role in helping customers implement and customize our platform. And while our entire platform benefits from having these great partners, the contact center can be a particularly complex area for customers, and partners play a critical role in those projects. In fact, 70% of our largest Flex deals this year involved a partner. So we're thrilled to have such an extensive community of great partners around us. With all that, I'd now like to switch gears and spend a couple of minutes talking about gross margins. As you can see, our non-GAAP gross margins have been consistently in our target range of the mid- to high 50s. We've talked about a lot of the things that can impact this number from international and product mix to FX and more. And yet, we have still been able to keep it consistent. And as we've said, we are not focused on gross margins today, but rather on growing gross profit dollars. And we've consistently grown our gross profit dollars, which allows us the ability to reinvest back into the business to take advantage of the large market opportunity that I mentioned earlier. But again, different products will drive different results here. So let's take a bit of a closer look at our product margins. What we're showing here is the average product margin for each of these product categories over the last 6 quarters. And as we've talked about, messaging has the lowest gross margin of our core products, as there are obviously carrier terminations costs and more recently, ATP fees that impact the margins. But as you can see, our other core categories of voice, e-mail and application services all have higher gross margin than our corporate average. So over time, as those products become bigger percentages of revenue, we expect to see our overall gross margins continue to increase. And as you'll recall from my earlier comments, our messaging business has reaccelerated. And at a relatively lower margin rate, that's going to negatively impact the overall margin rate in the near term. When we look at our product portfolio, product margins can vary. We put this chart together to help provide directional guidance across our products. To no surprise, international messaging has the lowest gross margin. On average, international messaging gross margin is roughly half the gross margin of U.S. messaging. This is due to structurally higher costs in most international markets. As mentioned earlier, we are experiencing a reacceleration within messaging, the largest portion of our business, which has resulted in a slight headwind to overall gross margin. When considering all of the "problems" businesses might be confronted with, especially in this environment, reaccelerating revenue of our largest and most mature product is a great problem for us to contend with. When considering some of Twilio's other products, U.S. voice, even with a telephony-based cost structure, has higher gross margins than the corporate average. Furthermore, e-mail and application services products have gross margins north of 85%. As we showed earlier, we've accelerated e-mail since acquisition, and many of the app services products are growing much faster than the overall business. We continue to have success with these products, and that's what gives us the confidence for gross margin to accrete upwards over time as these products become a larger portion of the overall business. In this last section, I want to talk about our investment philosophy. At the start of the year, we talked about this being a year of investment. That was obviously before COVID. Due to COVID-related dynamics, we have not been able to make as many of the investments as we initially planned and expect to catch these up in 2021. So let's wrap up by taking a look at the investments we continue making to support growth at this scale. As we talked about at the start of the year, we have continued to invest in our go-to-market organization. We have a very efficient go-to-market strategy as our developer-focused model allows for easy, low-cost onboarding for many of our customers. And you can see we're one of the best in the tech industry. And we've maintained that efficiency while growing our quota-carrying reps by 79% year-over-year in Q2. We've also been expanding our go-to-market presence in international markets where our quota-carrying rep headcount is up more than 90%. As we've continued to move up into the enterprise segment, hiring reps with enterprise sales experience is an important investment to allow us to continue to grow our presence in the market. And of course, we have to give those sales reps products and features to sell. So we are continuing to invest in our R&D function. We have over 200 discrete engineering teams across Twilio focused around the 4 key pillars you see on the page. We are building scalable infrastructure, fantastic products that must serve all of our global customers, and trust through fraud and security protection is always the #1 thing we sell. Ultimately, all of this is geared towards building the best customer engagement capabilities in the marketplace. We also know that we can't always build everything, and acquisitions are a part of our strategy. A preponderance of our acquisitions have been smaller tuck-in deals that added important functionality or brought in important talent. And of course, we've talked about SendGrid and the success we've delivered with that acquisition. When we consider M&A, we'll look for assets around customer engagement, product expansion, technology capabilities or something that will expand our international presence and growth. We always go through a build versus buy versus partner discussion. We've been judicious in our approach to M&A, and we do anticipate M&A will continue to be a part of our strategy going forward. And quickly, we have made good progress on scaling our systems and processes to support our growth for the future. Our work is certainly not done here, but a few examples of areas that we've been investing in include adding more automated billings features to our platform, enhancing CPQ functionality for our sales team, streamlining our quote to sign process, and we are looking to upgrade our ERP over the next 24 months. Finally, we believe collectively, these investments will fuel our growth for the foreseeable future as we address this massive market. In the past, you've heard us describe our investment is geared towards delivering elevated growth over multiple years. In fact, we expect to deliver 30%-plus organic annual revenue growth for at least the next 4 years. From a margin perspective, you saw that we have several high-margin businesses that will continue to become a larger percentage of revenue over time, plus a reaccelerating messaging business. In the near term, we are focused on growth, not at all costs. But if it means reinvesting dollars that would otherwise drop to profit in the near term, we will do so if we believe it generates higher growth outcomes for investors. But in the long term, there is no change to our model. We continue to expect non-GAAP gross margins north of 60% and non-GAAP operating margins north of 20%. So let me wrap up. And in doing so, I wanted to highlight a few key items. We have a large and growing addressable market and are delivering strong growth at scale. Our high-margin application services products are continuing to grow as a percentage of total revenue. We have a very diversified customer base across industries and customer sizes. And finally, we expect to continue to deliver elevated levels of growth at 30%-plus for the next 4 years as companies continue to adopt our platform to deliver the future of customer engagement. And with that, we'll turn it over to questions and answers, and I hand it back to Andrew Zilli.

Thanks, Khozema. So like I said, we'll go ahead and go through the questions that have been submitted via the Zoom. So we'll start off. The first question is actually the first 2 are related to TAM. So it comes in from Siti Panigrahi at Mizuho and Matt Stotler at Blair. What's driving the TAM expansion from $62 billion in 2020 to $87 billion in 2023? And how much of that TAM do you think is greenfield versus displacement? And what level of penetration do you see in the major segments that we broke out?

Okay. So there's a lot in that question. So let me just take a step back. So I think what's helped us a lot is that we've been in markets that have been large and growing already. And I think one of the pleasant surprises that we always experience when we work with our customers is that they continue to surprise us with many of the unique ways in which our platform can be used. They're always promulgating new use cases that we oftentimes don't even foresee. And so I think that's one aspect of the TAM expansion. The second aspect of the TAM expansion is our investment in new product categories. So as I pointed out in my remarks, we've started in programmable messaging and voice and things like that. And since then, we've gotten into areas like e-mail, like marketing. We've gone into the enterprise cloud contact center market with Flex, and that's driven a certain amount of TAM expansion. And then I think the third dynamic, and this is perhaps illustrated by our relatively early foray into a vertical like health care is that several of these verticals have not even really begun their own digital transformation journeys. And so as we continue to work with customers in some of these newer verticals, we're also seeing TAM expansion in that regard as well. And then obviously, as we look at some of these TAM dynamics beyond our own experience, we look at what some of the external analysts and so forth put together in terms of the way that they're evaluating and analyzing the marketplace, and we use that to inform in part some of our investment decisions.

Great. Next question comes in from Will Power. And the question is, can you discuss the sources of upside to Q3?

There's not a lot, Will, that I can really say about Q3. We're not really providing any more details or comments outside of what was discussed during the presentation and our 8-K filing. We expect Q3 guidance -- or excuse me, Q3 revenue to be ahead of the high end of our guidance, and we're still closing the books right now, and we'll share all those details with you when we disclose our earnings.

Great. Another question from Matt Stotler. 10 million developers is an impressive number. What is the total global population of developers that you think can use Twilio?

Yes. I think as we look at the marketplace, we obviously do have a very strong developer ecosystem and we spend a lot of time ensuring developers have the best documentation and APIs, understand our platform and can deploy use cases very quickly and efficiently. I think our developer community basically signifies the hard work that our developer, of Angelo's team, does curating developer mind share and ecosystem. Now with specific regards to the number, it's the number of developers that have signed up with a unique account. And so that could be an enterprise customer with tens or even hundreds of developer accounts all the way down to a college student that's testing out an idea. I'd also add that what doesn't necessarily put an upper boundary on that number, which makes it interesting for us is that we're seeing more users on the Twilio platform that aren't per se software developers, but instead, they're IT professionals and are using products like a Twilio Studio and are able to avail themselves of our platform in that fashion. So hopefully, that helps.

Great. Let's see. We have one from Marcelo Lima. Could you discuss to what extent do you expect the adoption of 5G to accelerate the IoT business and how big that business could get?

Yes. We're very excited about the overall wireless business. We think some of the recent technology adoptions are definitely going to be accelerators. You probably saw -- or hopefully, you saw and if you haven't, I'd certainly encourage you to watch Jeff's keynote from yesterday, where he provided Jeff's keynote from yesterday, where he provided a little bit more color in terms of what we're doing from a product perspective to ensure success in the marketplace. IoT is a hard one for us to call because the market is so huge. I mean the TAM on IoT alone is just massive. I mean it eclipses even some of the numbers that we showed on this page. We've tried to kind of confine it down to wireless IoT only and some of the capabilities that we think we can add. It could certainly be larger than that. We have a great business today. It's a relatively small business. So we're concentrated mostly on executing the business that we've got, but certainly excited about the prospects of that business in the future and think that we serve a massive TAM, and definitely 5G will be an accelerator.

Great. Our next question is from Ittai Kidron at OpCo. While you post nice growth from the G2K, it still feels very low and under-penetrated. What is the barrier for greater progress here?

Thanks, Ittai. Excuse me. I'll just take a sip of water. I don't think there's a big barrier. I mean I think it's just a function of time. George will be on in a few moments to take Q&A as well. I mean it's one of the areas that we've been making investments in. It's been a more recent investment, I would say, than some of the other areas we've been investing in. And generally, we're pleased with our growth in that market. We built out that go-to-market motion basically over the last couple of years. And as we showed in the pitch, the enterprise contributes about 36% of core Twilio revenues, which is up several points. And as enterprises look to digitally transform, I think our platform is going to gain prevalence and it's going to become that customer engagement platform. But I don't really see a barrier other than time, and I think we just have to keep executing and we'll get there.

Great. Our next question is from Rich Valera at Needham. Does your 30%-plus for 4-year revenue growth target mean 30%-plus in each of these years including 2021? Or is it a CAGR?

Yes. I mean we're not providing like specific guidance for every single one of the years in between. But we see an overall 30%-plus number during that time frame. I think we're still kind of working out the details. We obviously have a forecast that we put together over a multiple year period, but we feel good about being able to post 30% growth over multiple years.

Great. Next question is from Matt Stotler. Can you break out Flex specifically as a percentage of total revenue?

Yes. I mean as we said, we're certainly excited about what we're doing on Flex already. In terms of breaking it out as a more specific number, I don't think we're ready to do that yet. I mean we're very happy with the progress that we're making. As you saw in the pitch, that revenue rate is growing much faster than the overall business. COVID has certainly been a contributing factor in terms of digital transformation in contact center. We noted one of our largest deals ever. Andrew noted our relationship with Nike that Jeff talked about yesterday. We continue to invest in the product, R&D, go-to-market, sales specialists. And look, we've been transparent and also letting you know that Flex is a relatively small percentage of revenue today, and it just doesn't break -- make sense for us to break it out, I would say, at this point in the life cycle.

Great. Our next question is from Brent Bracelin at Piper Sandler. What are the growth rates across usage versus nonusage revenue segments? Nonusage is 24% of mix, but back in 2017, was less than 10%. So could you walk through the biggest drivers of nonusage growth and growth rate year-over-year?

I do not have those details at my fingertips. Zilli, do you have any of that math with you? Otherwise, we may have to follow up on that one.

I don't. And my screen is up and sharing right now. But Brent, I'll follow up with you and get back to you on some of the details. I mean from the nonusage percentage, obviously, that has some significant contribution there from things like SendGrid, right? As the -- although we showed on the slide that SendGrid, the e-mail portion actually contributes to both usage and the nonusage. A bulk of that is in the nonusage bucket. So that's a big contributor there. Additionally, something like Flex where we have pricing options that are based on seat counts versus agent hours can also -- are also driving some additional contribution to the nonusage part of that business. But we'll follow-up if there's anything else more specific that would help clarify that a bit more.

Zilli, before you go to the next question, I just wanted to clear up or add to one of the answers that I provided earlier in terms of our revenue growth. It is going to be 30% in each year. I wasn't as clear about that as I could have been. So just to add to that earlier question.

Great. Next question is from Nikolay Beliov at BofA. As you scale and have more purchasing power, could messaging gross margins go well beyond 45%? Are there ways you can alleviate structural issues that currently limit messaging gross margins?

Yes. I think that's certainly something that we look at. I think the kind of the general basis of your question is that as we aggregate volume, would we get some sort of volume leverage? And I think there is some truth to that. So I think there's potentially some opportunity. I would encourage you to remember there's still a lot of puts and takes in terms of what makes up the margin rate of messaging. We showed you some dynamics around international messaging, for example, that are a lot higher, for example, than I think what a lot of folks thought just based on the way that we broke up international. So there are going to be puts and takes. I think in terms of our total, we feel good about being in the mid- to high 50s. We feel good about our long-term model being over 60% in gross margins. And I think we've got a lot of other products that contributed to it. And messaging over time perhaps could be one of them.

Great. Our next question is from Alex Zukin. When would you expect messaging revenue growth to normalize? And how important is bidirectional messaging as a growth driver near and intermediate term? What percentage of total messaging growth is outbound versus bidirectional today? And where do you see that trending?

Okay. So there's a lot in that one. So let me start with just kind of generally messaging. I mean I think one of the things that we're clearly really excited about is that we had a great messaging business, and it has been growing historically really fast anyway. And what we've seen over the last year or so as a result of partially COVID, no doubt, as a result of certainly a lot of hard work and the investment into our products that we've been able to reaccelerate it. And so we feel great about how that segment of the business is doing today. And I think we feel good about where that's headed, and that certainly informs the way that we're thinking about our belief around growth over the next several years. We're not breaking out outbound versus inbound, specifically, but more of it is going to be outbound, which is probably not surprising. We are very excited about Conversations. And I think it's a product like a Conversations, which really allows us to create that true customer engagement platform, which obviously lends itself to bidirectional communication. Pretty early days there, but we think that there's a ton that we can do. And as companies look to engage with their consumers, that's certainly going to be one of the features in the toolkit that they're going to build out to build customer engagement.

Great. Next question is from Nick Lawler. Are newer cohorts more or less or similarly likely to start their journey on a higher level service like Conversations or Notify versus the base messaging service?

Yes. I'm not sure that there's a particular trend there. I mean I think what we're -- when we work with customers -- I mean, first of all, there's like a developer angle, right? And so a lot of it happens very organically. And depending on the particular customer that's working with us, they're simply solving for a use case. And our platform, the great thing about it is that it has all of the different building blocks that one needs to serve whatever it is that the use case is. I think what tends to happen, as we showed on one of the slides earlier is that they start to grow with a certain product as they continue to build out additional use cases or potentially go into other markets. And then beyond that, they start adding more and more products as we showed, and that leads to a net expansion rate expansion, if you will. So I wouldn't call out one or the other. But probably, they start with some of our more messaging and voice-oriented products. I wouldn't say that there's like a trend that persists through the business in that fashion. They could start with anything and we want -- we are actively encouraging them to use whatever it is that satisfies their use cases.

Next question is from Alex Zukin. The 30%-plus guide for 4 years is truly amazing. So I guess can you talk about the confidence to guide 4 years out, coming off of a quarter where you didn't have enough visibility for a full year guide?

Well, I mean, I think that when you think about the near-term dynamics versus the long-term dynamics, the near-term dynamics are a little bit more tricky, obviously. I mean we're still navigating a global pandemic. We're still navigating a variety of different macro issues, obviously. And so it has been a little bit harder in the current year to forecast revenue. And we're not unlike a lot of other companies that withdrew their annual guidance in Q1, just given some of the impacts like those. And I would also say, like in a model like ours, we're 75% as we showed, our revenue is usage-based. Forecasting in a particular period can be a little bit more challenging than in a standard SaaS business in the short term. But what we've done and taken great pains to develop is a long-range plan, and we are very confident that when we look out over the next several years that we have the ability to execute against that plan. And we talked about the massive market opportunity, and we believe in our own execution, and we believe that we can continue to deliver those very high levels of growth. Excuse me. And rather than just focus on the short term, I think this is a better way, honestly, for us to think about our intermediate-term growth targets.

Great. Next question is from Derrick Wood. How much of your business is channel-driven or influenced today? And where would you like to get that over time?

I assume we're talking about like partner-driven and stuff like that.

Yes.

Yes, I think it's still a relatively small percentage of the business. I mean it's obviously growing very rapidly. I mean we think partners are going to play an important role. I would distinguish that there are 2 types of kind of channel/partners. You've got ISVs and SIs. We've had great relationships with a number of folks who either are or act like ISVs for a long time. And SIs are clearly a little bit earlier as a motion for us. But being able to register a GSI, I think, for us, was a great add to our overall partner ecosystem, and we're making great progress.

Good. Our next question is from Michael Turrin. Where are you in terms of international penetration? Mentioned 50-50 split on voice and messaging, but U.S. growth has outpaced international year-to-date. So is there overseas appetite for the broader market set -- broader product set as well?

Yes, there is. I mean so there's -- just to maybe unpack that a tad. What we showed was in terms of the way that, that traffic is center-terminated. What we disclosed when we break out our earnings after quarters is international based on the company's origin or company headquarters, basically. And so that's -- there's a little bit of a difference just to clear up the question in terms of what we showed today versus what we historically show when we break out our earnings guidance between domestic and international for SEC purposes. Now in terms of our overall enthusiasm and investments in international, I mean, I think we're very excited about it. We're -- we feel like there's a lot of opportunity in a variety of markets. We've been very specific about investing in particular markets like sort of one at a time on a kind of named country basis, if you will, but we're very excited about international. As I noted in the presentation, we're hiring in international markets at a higher clip than we are in aggregate. And so I think that remains a really important area for us to keep investing in, and we're very excited about it.

Next question is from Marcelo Lima. We've seen the impressive cohort and DBNE data, but could you give us a sense of payback period on sales and marketing investments and LTV to CAC?

Yes. We don't break out those metrics. I mean I would say, as you saw from the slide that I provided that we have a very strong ROI on our go-to-market investments. We remain very low in terms of that spend as a percentage of our total. And I think a lot of that is attributable to our developer-first model, and we feel great about the way that we've been able to spend money there and generate returns. And I think the proof of that is obviously in our elevated growth rates.

Great. Next question is from Meta Marshall. Does that gross margin given on messaging include the A2P fees?

Yes. Those numbers are all in. Yes.

From Alex Zukin, video continues to grow off a very small base. But I guess if you could look out over the course of 4 years, what percentage of revenue could that represent?

Well, we're just seeing a lot of activity right now in video. And we're not -- while we provided a forecast over the next 4 years, we're not providing a detailed revenue forecast by product over the same time frame. What I will say is that, we -- you clearly have seen some tremendous growth in video over the period that we just showed. We're really excited about the product. It's getting great traction with customers. We are investing in it. And I think the notion of having an experience all within the context of your app versus having to leave and use some of the other products in the marketplace, ours is a lot more attractive, particularly when you look at some verticals like telehealth or e-learning. And we've just seen great traction there. So we're really excited about what we can do with it, but we're not breaking out products for the next 4 years.

All right. Next question from Nikolay Beliov again. What are the factors driving the 2020 cohort running higher than pre-2020 cohorts?

I mean there's always a series of dynamics in these years. And I would caution you to kind of think about any given year as like having a particular story. I think 2020 has been just sort of a consistently strong year. I mean we've been growing and expanding with our customers in every one of the cohorts. And even if you look back to like 2011, customers there continue to increase usage and find new use cases that they can leverage. And I think what we're seeing in the current year is simply a trend of what we've seen over a long period of time. And I think, again, our investments in go-to-market make a difference here, our investments in having really easy-to-use products make a difference here. And COVID-19 obviously provided a slight tailwind, but there were some negatives in there as well due to some effect on customers. But I'd say it's just part of a longer-term trend that we've been a part of for that time frame.

Great. Next question is from Alex Kurtz. With your guidance of 30%-plus growth over the next 4 years, how much will Flex contribute to that?

Yes. Again, I mean, we're not breaking out the revenue guide by product. We feel good about the way that Flex has been performing. We feel great about some of our recent wins on Flex. I mean, clearly, application services is growing faster as a percentage of our kind of total product suite. We expect it to continue doing so. And on a kind of relative basis, I'd expect that it does contribute more over time. I mean, certainly, that's part of what informs our long-term model around gross margins. All that said, we've also got a reaccelerating messaging business right now. So there are going to be some puts and takes, but my net-net expectation would be that it's a higher percentage. But we're not breaking out products today.

Great. Next question is from Meta Marshall. Are there any single product customers in the $1 million-plus annual revenue cohort?

Just to make sure I understand the question or maybe you can infer it. Meaning, are there any of those customers that are just using one product?

I believe so.

Yes. I mean we don't -- we typically don't break out like what individual customers are doing. I'd have to go back and look at that data specifically to give you an answer. I just don't have that one in my finger tips, Andrew, let's take that as another follow-up.

We'll do. From Matt Stotler, roughly how many quota-carrying sales reps do you have today?

Yes. Again, that's not a piece of data that we break out. We did talk about that we have very efficient sales and marketing expense. We did talk about the fact that we've increased that number by 79% through the Q2. So we try to give you a few data points around the significant investment that we've put into that portion of our employee base, but that's not a number that -- similar to any of our numbers that we're not going to break that out separately in terms of our employee base.

Okay. Next one from Siti Panigrahi. How has your investment in product strategy changed since March from the pre-COVID world?

Well, I think the interesting thing is that whether it's product strategy or anything else, I wouldn't say anything has had a markedly different focus. A lot of the investments that we talked about, frankly, back in January, which feels like ages ago, but from back then, we talked then about R&D investments being important. We talked then about go-to-market investments being important, and we talked about infrastructure investments being important. And so I think all of those have been areas that we've continued investing in. Basically, at the same pace and to the extent that we can, we have had a little bit more difficulty in hiring, as we've noted in the past. And it's just harder, in some respects, to do some of this stuff remotely. So that's what causes us to kind of think that the stuff -- some of this stuff rolls into 2021. But in terms of product, if I was to highlight a couple of specific items, I mean, clearly, video, per the last question or 2 questions ago, that's certainly become a really interesting area. And just given the excitement that we've seen with customers, given the growth that we've seen with customers, I think that is going to be an enhanced focus area for us from a product standpoint. Flex, given the enthusiasm that we're seeing with customers, the adoption rates, given some of what we noted even on today's call, I think that's going to be another area that we've been investing in. And so I don't know that, that one markedly changes. But what we've seen is reinforcing, for sure, in terms of the product investments that we were making. I think maybe it was a little bit coincidental, but like having the HIPAA certification and being a big player in health care, I think that was important to us. And I think there may be some vertically oriented investment that we do there in that particular category, just because we think that's a good one. But in general, I wouldn't say there have been radical changes in the way that our investment or product investment philosophy has evolved.

Great. Next question from Derrick Wood. Do you anticipate any directional changes in gross margin within each product area, particularly when you look at messaging and voice?

Again, like we're not providing like guidance on margins per product per se. What we tried to do today was give you all a sense of what are the gross margins in terms of each of these different products. We try to kind of give you then a slightly more detailed level even on a scale in terms of international versus domestic. These things bounce up and down from time to time. Our kind of revenue mix bounces up and down a little bit time to time. There's FX. There's international dynamics. So I'm not sure that I'd even be able to provide like a really detailed answer, and we're just -- we're not providing guidance at that level.

Great. Another one from Matt Stotler. How do you think about 30%-plus growth for the next 4 years as it breaks down between new and existing customers?

Yes. I mean, I think one of the things that's been great about our model is that we've continued to expand at a really great clip with a lot of our existing customers. And so that kind of same-store sales metric, if you will, has done well. I mean I do think it's going to fade a little bit over time. I mean it just has to, given how large the business is becoming. But I think we feel great about continuing to grow with a lot of our existing customers. And if you just think back to that cohort chart that we've shared with you and just reflecting on some of those 11 customers as they continue growing, I think we feel like it's going to be pretty balanced. I mean new customers are going to grow with us. We continue attracting new customers at a really rapid rate. But we've got a really strong and super diversified base underneath that. And so I think we're in great shape there. And I think G2K is another area in which I think we have a lot of opportunity to grow and certainly work with our partner ecosystem, too.

Great. Next question is from Marcelo Lima. What big picture question do you wish investors were asking you right now but aren't?

Well, we tried to kind of tee this up in the beginning. I think that the focus of our messaging, which is not a coincidence, is consistent with kind of the way that we think about the company. And you should certainly ask Jeff and George about this during their sections, too. But we're very much oriented as we go forward around customer engagement. And we think we have a platform with all of the winning capabilities that are required to help customers develop phenomenal engagement strategies with their consumers. And the way that we -- what validates that for us every day is our usage-based model, which is maybe another area we don't get a lot of questions about, but our usage-based model that is kind of self-reinforcing. I mean every day we show up for work, we've got to earn our customers' business. And the fact that they're using our platform more and more every day means that they're getting a great ROI out of the usage of our platform. But whereas perhaps before it might have been geared around specific communications, the reality is, is that we look at the marketplace all through the lens of how do we engage with customers, how do we allow our best customers and all of our customers to engage with their consumers and create the best experiences to be able to do that. And I think in the big picture, that's really what this whole thing is about. And while we feel great about some of the underlying metrics, we feel great about our long-term model. We certainly have a lot of confidence in where we're headed, otherwise, we wouldn't have said 30% over 4 years. I think the real story behind the story is customer engagement. And I think that is kind of the transformative thing that's happening. I think that's the secular tailwind that's behind digital transformation. And that's what's going to create stickiness and great relationships with us and our customers.

Great. Next question is from Alex Zukin. Given the COVID tailwinds you have seen in the business this year, how do you think about comping those growth trends next year? Is there any reason why or why not, given the new customer growth this year, with accelerated digital transformation trends, why DBNE could -- would go up next year?

Well, again, we don't guide on DBNE, but I'll kind of take the basis of the question. I mean as I said in my earlier remarks, what we think is really interesting that's happened with some of the COVID tailwinds, let's say, is that if you think about a sector like a health care and education or e-commerce, what's great about those use cases that we've been able to deploy is we think that we are supporting what is now -- what was already a secular tailwind is now taking hold in those industries. And so, excuse me, we think there's very resilient revenue in those industries, and we think we can continue to grow with customers that we've landed there. The other dynamic is that there have been some negatively impacted industries, which we've discussed before. And again, I mean, I don't know if it's going to happen next year or earlier or later, but we do think that the folks in ride share, hospitality, travel, those industries are coming back at some point. And I think that's going to provide a nice tailwind for the business as well and allow us to continue growing. How it affects DBNE again. I'm not guiding to that. We feel great about the numbers that we put up thus far.

Great. I think with that, we will wrap up with Khozema, and we'll give about a minute of a break here, and we'll welcome George Hu, our COO, to join us for a Q&A session. So I just cleared out the Q&A queue. So for those that still have questions in there, we will try to get back to you or maybe cover those as we chat with you over -- after we report earnings. But if you have questions that you'd like to post to George, go ahead and add those to the queue now, and we'll welcome George here in about a minute or so. [Break]

Okay. It looks like we have a few questions coming in. So George, I just want to check to make sure you're with us.

I believe I am.

Great.

If you can hear me, then I'm on -- then I am.

Indeed. All right. So we'll go ahead and get started here. I guess, actually, first, George, if you just want to give maybe just a minute or 2 intro on what your takeaways from SIGNAL are this week and what you're excited about.

Sure. Well, first of all, it's great to be on this call with everyone. We're having a fantastic SIGNAL. I don't know how much of the conference you guys have been able to attend, but I've just gotten great feedback from customers that are excited to do more with us. And I think that is the main message is that we are seeing this digital acceleration not just happening in kind of our research, but now we're seeing it confirmed in all of the meetings and reactions we're getting from customers. And I think there's just a lot of excitement about our company, about the space we're in, and really about the potential to be long-term partners with our customers. So I couldn't be more thrilled. And also I want to really thank our marketing team for putting on such a fantastic conference in the middle of very difficult circumstances.

Great. All right. So with that, our first question comes from Alex Zukin. George, you guys have talked about adding enterprise reps well ahead of the growth rate. So maybe just discuss the trends you were seeing this year versus last in those larger enterprise conversations? And can Deloitte and others be helpful beyond Flex deals?

Yes. So that's a great, great question. Yes. So Khozema walked through some of our growth in investment and distribution as well as our momentum in the enterprise and the G2K accounts and such. And I think if you look at the data, you noticed that our ASPs are going up, and we are selling higher than ever before. I think you can see that even from the people that are speaking at SIGNAL. We have got 2 fantastic CEOs from Delta and Nike. So we're able to access higher and higher levels in the organization, and we're having really a broader conversation. I think that what COVID really did for us is it really enabled us to have just a different kind of conversation for a lot of customers that maybe start with one use case. And if you look at Nike, for example, they started with no relatively straightforward SMS use case with us a while back. And now we're having a very different conversation because, oh, now we've got to empower a front-line employees, and we've got to transform our contact center. And we've got to add new channels with video or we have to do contactless delivery and update our mobile experience. So all of this rapid change in acceleration is causing a much more strategic conversation, which means I think the ability to sell more products, I think the ability to increase ASPs, the ability to build stickier relationships and the ability to sell higher, which is honestly been the strategy all along. And I think COVID has been an accelerator for that for us. And then I think that's also drawn interest to the GSIs to the second part of your question. And I think that there's something correct about the question in the sense that I do think Flex has been a really concrete jumping-off point for SIs in general, not just GSIs. But from the nature of all the conversations we're having with companies now, there is no reason why we cannot broaden the SI work beyond Flex. And in fact, even recently, I've been in a bunch of conversations with customers who brought in SIs for, let's say, video work, which is something that was obviously not as much on the radar a year ago. So I do think that we're just at the beginning. We are targeting more GSIs than Deloitte. We view it as the first of -- maybe not a ton, but first of an important group of GSIs we want to bring to the table. And we couldn't be more thrilled with the progress. And I'm glad you guys can stop asking me when we're going to GSI.

Next question is from Michael Turrin at Wells. Can you talk about the Flex ecosystem announcement? Does that help unlock a certain subsegment of the contact center market that was previously harder to reach?

Well, I think it's less about maybe unlocking a segment in the sense that we've always stated from the beginning that we thought Flex is a great fit for the enterprise contact center because of the nature of the build model, the need for customization. And those enterprise contact centers have legacy tools that they need -- they need to keep some pieces of those. They need to integrate with those. And so it's something that we've seen -- I would just say more generally, I think that the ecosystem will accelerate our Flex momentum as we've been out in market with a -- for a couple of years with the product, we've definitely gotten feedback from prospects and customers that these types of integrations, out-of-the-box integrations, would accelerate deployment, accelerate or remove friction in the sales cycle. So I think it's a broad-based accelerator for Flex, more so than I would say it's targeted at any particular size segment or industry segment. I think it's largely a continuation of the strategy that we laid out. And I think that's one of the nice things that I've seen in my time at Twilio is that the core pillars that we lay out, we stick to and we grow with them over time, whether it's products like messaging voice or Flex or it's pillars like enterprise or international. We take a long-term view and just continue to add piece by piece by piece to the strategy, which is great.

Great. Our next question is from Anouk Dey at Endurance. George, can you elaborate on customers wanting to do more with us? Are new customers starting their journey with Twilio on different services, i.e., Conversations than in the past? And when new customers typically start -- or when new customers typically started their journeys on messaging?

I would say that for historical pattern has largely been messaging as the Trojan horse -- like the #1 Trojan horse, entry point for Twilio. And with the acquisition of SendGrid, I think it added another material entry point, which is e-mail. And those 2 are -- I just count of company, by far, the 2 largest entry points for us. I would say that Flex by count of company maybe has not been large entry point, but it is bringing us into a new set of companies and decision makers, ones that have not been thinking about a messaging solution per se, but a contact center solution. And for 2020, video has been an interesting entry point. That's why I'm very excited about the Twilio Video WebRTC Go product. I think that if we execute that correctly with our developer animation that, that could be a very interesting new onboarding vector for us. And how that will play out as we get through the pandemic and enter more of the new normal, I don't know. But what's really exciting now is that there are more and more vectors and dimensions for companies to onboard onto the platform.

Great. We have a couple of questions here that I'm going to combine together, one from Jeff Kvaal and one from Alex Zukin. Just around the competitive environment with Microsoft announcing their Azure Communication Services, kind of just what you see as the evolution of the competitive dynamic, how we've differentiated against them and how that's changed over time.

I would say that taking a step back and look at the big picture here, I mean, I was at Salesforce, as many of you know, for 13 years, and we had -- we launched plenty of products. And there's plenty of pure-play companies that all did very, very well despite that. And I think the reality is that while we respect every company out there, we know that we are more focused on this space than anyone else, and we are putting all our energy into this like no other company in the market is. And you see that in the breadth of our vision, the investments we're making, the platform and the developer momentum. And I think that you can -- it's kind of a little bit of a shame we're on a virtual conference versus a physical conference this year. I think you'd feel it even more how much energy there really is around this company right now. So over the long term, I think we're going to win by basically being against any particular company out there by being more focused in really the things that we do really well, APIs, cloud, developer, breadth of vision, complete platform and the quality of our people and the teams and ecosystem we bring to that. I think those are all the core competitive areas we're going to win on. In the short term, I think right now, our understanding is they're pretty early days. And I think there's not a lot of comparison right now. But we're focused on the long term, and we're not honestly focused on any particular competitor. We're focused on just a huge market opportunity in front of us and how we're going to execute and meet customer needs better than anyone else.

Our next question is from Ryan MacWilliams at Stephens. George, has your strategy to engage new enterprise customer shifted as a result of COVID? And have any products launched over the last 2 years particularly resonated with those customers?

I think that at a tactical level, obviously, things have changed. We're not flying around on planes anymore, different tactics you use in a video world at the top of the funnel get to kind of get the meetings and move the cycles forward. So I think some -- at the tactical level, yes, there are some differences. But I would say, largely, it's been pretty similar, I would say, in the sense that we have a set of plays that we've been using to kind of get our foot in the door. A lot of them have historically, as I mentioned, been around messaging. Are we doing some more of them? Yes. As I mentioned, we have some new vectors to go in. But a lot of them are also, frankly, just new use cases around the vectors we already had like messaging, for example, like whether it's contactless delivery or notifications around deliveries and things like that. So I think it's largely accelerated the motions we have with maybe a few new tactics sprinkled in.

Great. Our next question is from Will Power. Twilio Frontline looks like a very cool product. Can you talk about some of the early use cases and any early comments from customers?

Yes, I think it's a cool product, too. And I think it's really a great product that has been borne out of, honestly, the evolution of kind of the discussions we've had with customers out of things like our Conversations product, where they've -- there's been a lot of excitement around the vision, but customers basically wanted to lower the lift, frankly, to build some of the tooling and the end user application side of it. So we're excited about it. And I think it's going to be very helpful in a couple of core use cases. So where are we seeing it? We're seeing it in retail clienteling. We're seeing it in wealth management. We're seeing it in kind of that last-mile delivery, logistics, things like that. We're seeing it in field service, so things like the Comcast technician type person who's going to come to your house. Those are kind of the 4 core use cases that we're designing around. And early feedback is good. And obviously, it's a newer product, so there's a lot of things they want, a lot of features and additions and things they want. But at the end of day, there's a lot of excitement around the product. I do think that I view this as part of a solution, and I think it will complement Flex very well. I think this is a great way of driving some fueling in other parts -- in more parts of the messaging business and the Conversations product. And I think I view it more as part of a solution than maybe like a stand-alone massive revenue driver on its own. But I do think it's going to be a cool part of the solution as you -- the adjective you used.

Great. We have a few questions. Again, I'm going to try to combine together various questions from Will Power, Ittai Kidron and Nikolay around the G2K. So what are the keys to driving deeper penetration over the next several years in the G2K? What kind of are the barriers to getting in and how do you think about the acquisition cost versus the pure developer-led go-to-market side of things?

Good question. So I mean I think the most fundamental thing you need is you need capacity. I mean you need distribution capacity, you need people that are willing to go and go talk to customers. I think that's a lot of still -- even if we're not traveling, it still takes time to build relationships and go through all of the process it takes just to get into an enterprise. To support that does take a different set of resources. Some of those are external to the company, like the GSIs, as we talked about already on this call. But also, we've brought in a set of things like vertical specialists on things like health care and financial services. We've complemented that on the product side with investments and things like HIPAA and other types of compliance and security and enterprise technologies or features. So yes, it is a different investment model to penetrate the enterprise. The return from that obviously comes from bigger transaction sizes. And also, I think that the enterprise is the most fertile ground for us to sell our highest value, stickiest, most interesting products, especially around the application services area. So long term, I think the enterprise is the place that we're not just going to be able to get to 7, 8 figure-type annual relationships, but also ones that have like a really, really good mix of the types of higher level, higher-margin services and products that we get more and more excited about in the company. So I think that's a long-term payout for making that investment today.

Great. Next question is from Brent Bracelin at Piper Sandler. Given your background in scaling multibillion-dollar models at Salesforce, the 30%-plus growth bogey would put revenue at $5 billion to $6 billion over the next 4 to 5 years. So what are the biggest hurdles internally that still need to be addressed to scale Twilio from a $1 billion-plus to the $5 billion to $6 billion scale?

Well, I think that there's probably nothing I'm going to say that's too shocking in the answer. I remember when I was at Salesforce, there was -- when I was over there as COO, one of the first things I tackled was a big investment in systems to really overhaul a lot of the systems that we had. Things -- a lot of things are being done manually. That's why I'm very excited about hiring Michelle Grover, our CIO. She is fantastic. And I think it's probably a sign of the things we need to do, the fact that she's our first CIO at this point in our journey. So I think that's one. Obviously, we have to hire well, hire smart and hire great leadership across the company, especially in areas that are more nascent. This is the time you bring in the builders for your global regions, for your key functions, for different segments. I think we've done a great job of that. We've got now, I think, some just fantastic leadership. Especially, I can speak for the area that I'm more responsible for on the go-to-market side. We've got some phenomenal leaders that I think have a lot of scale in them. And so I think that plus investment in the systems and the processes are the keys.

Great. Next question is from Derek Wood. Given how much the environment has changed and how you've seen demand for some many new use cases and initiatives come your way, how have you instructed the sales force to evolve the messaging? And what are you doing to shift to do more solution selling?

Great question. So this has been a big area of focus for us to move away from selling APIs to really doing deeper discovery and solution selling. I have to credit our enablement team and our product marketing team. They've put together a fantastic program that we call Use Case University where we really -- we used to -- when I first started, we did -- our sales enablement was focused on here. We're going to train you how to sell SMS. We're going to train you how to sell voice. And now we've moved completely away from that to here's peers' core use cases, both horizontally and vertically. Here's how you have these conversations. Here's the questions you ask. And even the way we hire people now, we put a lot of more emphasis on finding people that are great at whiteboarding, great at doing discovery, great at having a very broad-based conversation with a customer more so than let's just say a straight technical acumen on how to understand our technology. And I think that's just part of the natural evolution of the business. And we know we're still early days in it, but I feel really good about where we are, and the feedback from the field has been fantastic.

Great. Our next question is from Alex Kurtz. On the health care front, who are you displacing? And how much does that sales team need to be built out to capture the opportunity here in the U.S.?

Well, I think that who we're displacing depends obviously by product. And sometimes, these are new use cases. Sometimes, they're existing use cases. So that's a pretty broad question to answer. I don't think there's anything massively surprising. I will say on the video side, what is interesting -- or the telehealth side, what's interesting is -- and I think it's part of a broader phenomenon we're seeing, which is even beyond health care, is that when the pandemic first hit, we saw a bunch of companies put in horizontal video applications, the ones that you and I use everyday as knowledge workers to do meetings and try to use them for things like distance learning, telehealth, financial -- wealth management, exam proctoring, what have you. And they were just never really purpose-built -- these horizontals options were never purpose-built for these things. And so now people are taking wave 2 and coming back in and replacing them with more purpose-built applications, which is where you need a platform, where you bring in your developers. And I think that's what -- that's a trend that favors us over time. And if you look at some of the telehealth wins we've had, it's not that there wasn't an existing tool, but it was typically not very customizable, off-the-shelf video application. And then when COVID hit and things would need to change, it was suddenly -- uh-oh, we can't modify it. We can't change it. So we got to turn to Twilio.

Great. Our next question is from Mark Murphy. Did usage revenue from the travel hospitality verticals actually contract materially during the pandemic? Or were there enough situations such as Delta in which they found new use cases for Twilio that they held steady throughout? And if it did contract, when do you expect a full recovery?

Well, I think that we've already talked before in some of our previous earnings calls that we -- our success broadly was due to, I think, a diverse customer base and diversified industry especially. And so, I mean, broadly speaking, travel and hospitality was not -- was somewhat negatively impacted by COVID, and that was offset by gains we saw in other areas that we've already talked about. So I think that's probably the broader narrative. We have seen some bounce back, but it's probably what you would expect, given what you see in the broader economy. And I don't think there's like a huge story there, I think. As those sectors recover in the broader economy, we'll see them -- we'll kind of generally go along with it. Our hope is obviously that while we're doing that, that we are going to also keep a lot of the thing -- the gains we've gotten into these other industries. And also, frankly, that we do really believe what we're saying about this digital acceleration, that it's not just this is a temporary thing and everything is back to normal. We do really think that a lot of things have moved from physical to digital and will continue to stay that way. And when we talk to our customers, like some of the biggest financial services customers we have, they're not planning for the world just magically snap back to everything is going to go back to physical again. They're planning on a huge chunk of that staying digital, and that is, I think, what we believe as well.

Great. Next question is from Meta Marshall. You have noted hiring more contact center sales specialists. With most of those specialists being trained on traditional on-premise solutions, how has the process been of transitioning to more of a modular approach with Flex? And has there been a particular rep background that has been the most successful?

Yes. I mean, we have a specialist model today. So we're hiring like a kind of like a green beret team, if you will, of contact center specialists, both on the sales side and as well as the technical sales engineering side. So -- and that's a way of saying that we're not hiring them in massive numbers, right? We're hiring -- we're very -- being very selective and able to like really get the best of the best. And it is a more technical sale. It's more -- it's a building block product that requires developers. And so we definitely are looking for people on that side, especially on the SE side that have a little bit more of that vent. But by-and-large, we're able to find the talent we need, and especially the volumes we're hiring them, because we are still largely selling Flex through the broader sales force and bringing the specialists as needed.

And staying on Flex from Siddy Panigrahi, are you seeing Flex as supplementing the current contact center solutions or replacing existing solutions at customer sites?

It's both. It's both. It really just depends on the -- it depends on the customer. I think that what is exciting is that even when it is in Augment, there -- once people get a taste of it, their -- people get an intention to really move through it more and more over time. And so there's a -- not the one on the slide, but there's another insurance company in the U.K. that during the pandemic had to move everyone home -- all their agents home. They were on an Avaya system. They had to do it in 2 weeks. They had to do it on Flex because they just couldn't do it on Avaya. And now that we've gotten their CIO -- their CTO got a taste of the Flex platform, there's definitely a strong intentionality now to move more and more of that Avaya stack over to Flex over time. So I think that's the playbook. And over the long term, our intention is, of course, to win the entire contact center business for these customers.

Great. We have a couple of questions on Frontline again from Guy Tartakovsky and Greg -- I'm sorry, Andrew Frank. And it's -- the question is really around how do you think about the decision to invest resources into selling a more packaged solution like Frontline versus letting the developers create the solution themselves. And are these more packaged solutions likely something that they should expect to see more of?

Yes. I think it's a great question. And you know, one of our core values at Twilio is to wear the customer's shoes. And I'm really -- one of the things I really like about our culture and our philosophy is that, yes, we're great at APIs and we're great -- we're platform first, of course, that's true, but we're not purely dogmatic about these things. We -- our job is to serve customer needs. And so when we as a platform -- Frontline came from, as I mentioned, a lot of conversations with customers talking about both our -- a couple of years ago, just using SMS in these types of use cases to then maybe using conversations. And learning that there are a set of -- yes, there's a set of builders in the world that want to do this part of the work, but at the end of the day, they really want to focus their time and effort on the things that are differentiated. And the technology in Frontline is something that they were kind of just -- we saw a lot of customers recreating the wheel. And how do you build a client -- or a mobile app that enables people to do messaging and handle kind of just the basics was not something that we felt like was something that customers were going to build a lot of differentiation in. And so we want our customers to focus their development resources on the things that really give them value and differentiation, and that's similar to the approach we have in the Flex. So if our customer -- if that -- if listening to our customers brings us to more and more things that look like Frontline, so be it, that's great, but I wouldn't read into this that we've made some fundamental psychological shift and now we're going to go do a lot of apps suddenly. I think it's -- the consistent theme is listening to customers and going where they take us.

Great. Another question from Brent Bracelin. How ambitious are the M&A aspirations to augment growth and expand the portfolio, given the increasing success and popularity of other API models like Postman and Zapier? And kind of against the backdrop of Microsoft, why or why not would you look to be more aggressive in consolidating the best APIs?

No. I'll go back to what I just said. I think that we have great organic growth. So it's not like there's like a we have to do any particular acquisition to hit a particular growth number like maybe other companies think about it. No, we're focused on what customers want. And we want to create the world's leading digital engagement platform. And that's what we want. That's what our customers tell us they want. That's what we think is the big untapped underserved opportunity in the market. And to the extent that we can do it by building things, we'll build it. To the extent we can accelerate that by buying things, we will. I don't think it's a view of, well, like we should get every API company and acquire them. I think it's that we've got to become a great customer engagement platform and so let's do whatever it takes to go do that.

Great. Next question is from Greg Tory. How does the product road map look today versus 5 years ago? Do you feel like you've tackled more of the known opportunity than years past? Or does it just continue to expand?

Well, I think one of the super interesting things about Twilio is that like when I joined the company 3.5 years ago, we're pretty much known for a voice API and an SMS API. And at some level, you could say, well, that means that all the rest of communications is open to use so maybe you could argue there's more opportunity back then. But I view it very differently. I think that while, theoretically, the whole market may have been out there, what's realistically achievable, like a lot of it was like 3 to 4 to 5 steps away from where we were. It was just too far away to really realistically think about executing it. And now that we have e-mail, now that we have Flex, now that we have Autopilot, I mean, the things that are now like only 1 to 2 to 3 degrees of separation away from where we are today are actually much greater. And so I think that it's much more strategically interesting today than it was even back then because what is -- the art of what's realistically possible for us is exponentially larger now given the surface area of what we have. And still, against the backdrop of a massive untapped market opportunity. So I think there's never been a more interesting and wide open time for the product possibilities here at Twilio.

Great. Next question is from Alex Zukin. George, when you look at the 30%-plus 4-year growth guide, what gives you personally the confidence to be able to deliver that number in year 3 and 4 that may not be so obvious to investors at first glance?

Well, I think you got to talk to customers. I think that when you talk to customers and you ask them how far are they down on their journey for where they want to be, the vast number of our customers say they're just scratching the surface. They're dealing with, like most companies out there, even the biggest enterprises in the world, they're still wrestling with some of the most fundamental questions in customer engagement. Like, how do we even understand who my customer is? So we're certainly not in the eighth inning of a problem that's almost solved. We're at the beginning of a big opportunity that's unsolved. So I think as long as that demand is there and as long as -- or that need is there, excuse me and as long as we -- you fundamentally believe that there -- that digital engagement is the way -- is the way we have to reach our customers more and more, which I see and I believe personally, and I see it from our customers, I think that the market is big enough to support that kind of growth, and then it just becomes a matter of execution. And I think we're doing the right things on that side. We're investing and we're thinking long-term. So when this pandemic first hit in March, we did not pull back our hiring plan. We kept going, and that was intentional. And I think decisions like that and mentality like that, a mindset like that are what gives me confidence we'll do the right things to also keep that growth going years 3, 4 and 5 versus panicking and doing things based on short-term.

Great. Next question is from Derek Wood. How do you think about the opportunity for messaging services within the internal IT or internal business communications landscape? Is that an area you intend to focus more on in the future? Or would you rather stay predominantly B2C-focused?

Well, I think that we've got a long way to go in terms of in terms of business-to-consumer, business-to-consumer communications, business-to-consumer engagement. I think that is where our value proposition plays best because where we are -- where our approach, where our model shines is when you need developers because you want to do something that's unique and different and differentiated. And by and large, B2C is all about that. Whereas internal, let's say, employee communications, do we have use cases for that? Yes. Is there an opportunity for us there? Yes. Is it our absolute sweet spot compared to B2C? Probably not. We probably -- you probably want to be able to, like, when you go to a new company, figure out right away how to use the tools because you don't want them to be highly differentiated from the last company's tools. So I think that's how we think about it. Now, look, if our customers say to us -- all say to us at the end of SIGNAL, this is all great, but what I really need is a new way to actually facilitate employee-to-employee communication, then maybe we'll go have that conversation. I do think that Frontline could open an interesting door there for us, but certainly, that's not the focus for the company right now.

All right. Next question is from Guy Tartakovsky. With 97% of customers saying digital transformation accelerated by 6 years, do you see higher top-of-funnel interest, higher pipeline coverage, shorter sales cycles, et cetera? And do you see more C-level engagement?

Got a lot to think of out there. There's a lot of detailed questions inside that one question. So for sure, during 2020, we've seen definitely spikes in top-of-funnel engagement. And I would say, especially earlier in the pandemic, although we still see very, very healthy top-of-funnel growth right now. And yes, and then that obviously makes its way through the -- through the funnel, and we feel good about our sales productivity numbers at this point. And I think Jose might have talked a little bit about that. So it's one of the things I've been very excited about since our last Analyst Day years ago is that back then, we talked about good sales productivity. And I'm excited that we've invested as much as we have in capacity, and we can still talk about good sales productivity. So I think that's just, I think, very exciting. Andrew, I feel like I'm missing the very last part of that question.

Let me go...

Or maybe I didn't but...

Just go through it again. Just are you seeing more C-level engagement?

All right. That's right. Absolutely. So as I mentioned earlier, we're seeing -- I don't think 3 years ago, there was any way that we would have gotten the CEO of Nike at/or Delta -- and/or Delta to be coming to SIGNAL. And I don't know how many of you remember SIGNAL from 2017. I do, quite a different type of experience than what we're doing today even in a virtual world. So really excited about the maturity there.

Great. Next question is from Mike Walkley. On the competitive environment, how rate-sensitive are buyers? Once a use case scales, what keeps the customer for moving to a lower-priced competitor or platform running on an owned network, et cetera? And do you see this happening at all? And if so, how do you fight back?

Well, I would say this, like, by and large, the vast majority of customers that we talk to understand that, look, like everything else in life, at higher volumes, generally, people get different price points. I mean, I think that's true for us. It's true for every -- it's true for all software. It's true for the company I came from. And the -- but the exciting thing is that when I talk to customers, by and large, they say that their strong preference is to stay with Twilio, right, all things being equal. And so our job is -- our job is to listen to our customers and make sure that we are with them. And for the core products they're using today, making sure we're recognizing it when they do have growth with us and making sure that gets factored in. I do see us get consistently a premium in the market because people value the breadth of our platform, the quality of our delivery, the quality of the APIs, the quality of application, the whole experience. And then our job is to expand the usage over time. And as we expand our relationship, as we sell them Flex and/or Authy or other technologies out there, it's like anything else in life, the relationship gets deeper and stickier and all the kind of things you would expect. So that's our job. But by and large, customers -- people really are positive on the experience they have with us. And so by delivering that great customer experience, I think that gives us a huge edge in long-term customer retention. And you see it in our churn number and you see it in our DBNE numbers. It's -- we couldn't get those numbers if we weren't able to retain our customers and grow those relationships.

Great. Our next question is from Anuk Day. What was the thought process behind pricing the Video WebRTC Go product at a free level?

Well, the -- we view that as a way of really going for it in the video product in the sense that, like we are seeing big growth in the video product, but there's a huge untapped universe of developers that are basically trying and experimenting and prototyping on WebRTC. And rather than just focus on short-term monetization, we want to grow the buy as big as we can. And we think the way to do that is by onboarding a lot of these developers that are in their prototype phase and telling them, "Hey, you can do the same thing that you're doing over just on your own, but get a ton of benefit, have it run with a lot of the problems solved and also still do it for free." So this is -- I think this is probably the best marketing, at least in our minds, that we can do for the Twilio video product. And obviously, time will tell. We'll see how it plays out and we'll adjust if necessary, but I think it's a smart play and we're excited about it.

Great. Our next question is from Mike Latimore. The conversations API was a big focus last year, but didn't seem to be as big of a focus among sessions this year. So how is interest there? And when you look at some of the larger Flex deals, how many of them involve things like just voice or being more messaging-centric?

I think that -- it's kind of a bunch of questions wrapped in there. On the Conversations front, we are seeing interesting conversations. I view Frontline as honestly a natural evolution of Conversations. So I think the fact that we're coming back and talking about another product in this -- that's really -- it's really Conversations as an app, it's how I think about it, I think speaks to the level of demand at least that we see from customers for this. In terms of Flex, the part of the core value proposition for Flex is the omnichannel value proposition and customers come to us for that. Obviously, they don't go and roll out like 6 channels day 1. They typically start by getting their feet wet with one channel then add them over time. I just had a meeting with one of our early Flex customers who started with us on the voice channel. Their vision was always to go to messaging. As of today, they're already at 42 -- or they've already moved 42% of all of their support load to messaging. And their forecast is the next 6 months, they're going to move it to north of 80%, almost close to 85% messaging. So I think that speaks to kind of where we see the direction of a lot of our customers are going, which is start at one channel and then add the next one. Oftentimes, messaging is first or second on that list. But yes, we're -- we really do believe in this messaging-based modality for engaging customers. And I think you see that in Flex, I think you see that in Conversations and you see that in Frontline.

Great. Next question is from Marcelo Lima. Twilio Showcase lets customers contact partners, but do you plan on building a curated app store where customers can buy and use apps built by other developers?

I think that's probably a better question for Jeff. I think it's a little kind of more straight product strategy question. I think he's coming up in 5 minutes. So I'll let him tackle that one. I will say that having been at Salesforce for the app exchange, I do strongly believe in the power of ecosystems. And I think that Flex is exciting because I think it gives us really that first center of gravity to build an ecosystem around. So I think there's a lot more opportunity there, but I think I'll let Jeff give you the bigger picture there.

Sounds good. I actually think the remaining questions are also more sort of product and R&D-focused that I think would probably be better held for Jeff.

Great.

Thank you for now. That is it. So thank you, George, for joining us. Really appreciate it.

All right. Thanks, guys. Enjoy SIGNAL. All the best. Bye.

And we'll be back with Jeff in just about 2 minutes. So go ahead -- and if you have more questions that you'd like to submit for Jeff, go ahead and do so, and then we'll get started in a few. [ Break ] Okay. I think we'll go ahead and get started. Jeff, are you on with us?

I am. Can you hear me?

Yes. Absolutely. Thank you so much for joining.

Fantastic. Thank you, everybody, for being here today. Appreciate it.

Jeff, I think we'll just get started with maybe just a high level, and it actually kind of covers one of the questions. But what are you excited about that we announced at SIGNAL and kind of what's your takeaway from yesterday and today?

Well, first of all, I'll just say I'm excited to have SIGNAL in this virtual format. I mean, obviously, this year's thrown curve balls to so many people in the world, and to be able to get our community together, investors included, to really be a part of what Twilio story and what we're building and what our customers are building for everyone to learn from each other, especially when customer engagement, digital engagement, software agility, cloud scale, like these are the things every company is working on to be able to get everyone together under one virtual roof, if you will, is something I'm so excited to be able to do. And I'm really happy with how the team executed. I'm really excited, actually. It's a small thing, but the fact that our team really stepped up and built the Twilio event platform using Twilio is such a cool thing to be able to do. And yes, maybe we wouldn't have done that if it wasn't for the virtual SIGNAL, so that's a neat thing. As far as the product stuff that we've been investing in and we announced at SIGNAL, there's so much to be excited about here. First of all, the Twilio Video WebRTC Go I think is a really important product. Obviously, video is seeing such a tremendous growth right now because of work from home and COVID and contactless everything. And we -- this product is really going to help onboard a new level of developers to the product because WebRTC is open-sourced. It's built into every browser, so there's APIs essentially built into the browser that you can use that are free if you don't need sophisticated use cases. And so in some ways, we're competing with just sort of like open standards, what's built into the browser. And what I like about WebRTC Go is that we're enabling developers who are lured by that but who will then encounter all sorts of hard problems that they need to solve if they go that route now can get started using WebRTC for free using our toolkit. And then when they realize there's all these other things they might want to do or their use cases get more sophisticated, they've got a path to continue to grow using Twilio instead of kind of going down the dead end and then having to figure out what to do once they reach all -- hit all these obstacles at some point. Event Streams, I think, is a fantastic product because it's really unlocking the engagement data that Twilio has in a really streamlined way that can enable companies to use all the data that Twilio has about how customers are engaging with them, using all of the channels that Twilio provides in a really interesting and novel way. So I think Event Streams is great. I'm excited about the Flex ecosystem and the Deloitte partnership that we announced last month, but really put forth at SIGNAL in a bigger way. So the whole ecosystem we're building around Flex is exciting. And then, of course, Frontline. And I think Frontline is a really exciting product for us because, I think Simon said this in the keynote yesterday, but like basically, there's more non-desk workers in the world than there are desk workers. And so when we think about people engaging digitally, a lot of people think about sitting at a desk and at home and using tools like Zoom to like talk to each other or to collaborate with customers, and that's a world a lot of us live in, yet there's more people who aren't at a desk in the world than there are in the world. And so what Frontline allows us to do is to empower those frontline workers with an app and empower companies who employ those people to really quickly build and deploy the right solution for all those people who are on the go, whether it's the service technicians in the field, the delivery drivers, the retail employees, the health care providers, like people who are out there actually working with customers can now digitally engage with those people as well. And so I think that there's going to be a lot of new use cases that we start to see emerge now that we've lowered the bar and made it a lot easier for companies to roll out those types of engagement scenarios. It was not unlike what we saw John Donahoe talk about yesterday that Nike has rolled out using Flex. And so I'm really excited about the set of use cases that can emerge when we turn every frontline worker into someone who can now safely and securely engage with customers over a wide variety of mediums and platforms.

That's great, Jeff, super helpful. So we'll just jump into some of these questions. You mentioned actually the conference solution that we've built, and the question from Alex Zukin was sort of around that. So you guys built your own virtual conference solution, which, by the way, was slick. If only...

Thank you, Alex.

I guess at what point can you feel the team like Ignite or Inspire, which I think are Salesforce and Microsoft-like teams, kind of take it into the Fortune 500 companies to figure out their major customer engagement pain points and help them build on top of Twilio to solve those problems?

So I think I kind of missed the bridge from the conference platform that was really slick to what the question is.

At what point could we build a team similar to Ignite, which is a team that Salesforce has? Basically, a team of people that go into a Fortune 500, help them figure out the major customer engagement pain points and then help them build that on top of Twilio.

Well, we actually already do that. We do these workshops with customers already. And we have a team who will go in and essentially do the sort of whole whiteboard design ideation phase with customers. And really imagine, we like to say the art of what's possible, right? And we've been doing that for several years now. And I think that works out really well. When we go in with a customer, we show the most possible with Twilio. And we -- instead of just sort of try to sell to them, like, hey, here's all these products, you go in and you say, okay, look, what are you trying to solve for? What's the customer experience you're trying to build and your dreams? Let's map it out, let's put it on a whiteboard and then let's map the journey to how one would go about building that. Because usually, building is -- it's not all one and done. It's a journey. You build the first part and the second and the third, and it's iterative. And so we'll help them map out that approach. And when we do that, I think we find that customers are excited about what we're able to ideate with them. I think we land more pipeline. I think those deals tend to be bigger and the relationships are certainly better because we're seen as a trusted adviser, helping them grow their customer engagement strategy, as opposed to just a technology vendor. So that is something that we've been doing for a couple of years now quite successfully. And I think as we see success, we expand on those types of initiatives.

Great. We have a number of questions in here that kind of revolve around the M&A topic. So Thomas McGannon at Whetstone said you guys called out some marketing tech opportunities when you did your last equity raise. Could you pick up that conversation, kind of help think about the future up-stack market opportunities? And other people have asked about where filling out the product portfolio and some of the larger bets versus where you might think about tuck-ins, things like that.

Yes. Thank you for the question. What we tend to look at is where is our product road map taking us, where our -- and that's basically where our customers are pulling us. What are the big problems that customers are telling us and showing us with their actions that they need big problems solved, and therefore, where are we going as a company. And when we see opportunities to accelerate that road map and solving the problems that our customers need solved through inorganic means, those are the types of opportunities that look attractive to us. And we're always running the active game board to look at the variety of companies that could be out there. And when I think about it, there's the category of things that are in the AI and ML space that can make use of a lot of the data that Twilio has to unlock new outcomes for customers. There is capabilities as we grow internationally. We've done a couple of small tuck-ins to grow our international footprint. And then there's the engagement cloud. And when we look at the Engagement Cloud, what we see, because of how customers build on top of us, is that there are major problems out there with the status quo and how companies have to stitch together various apps in order to have a coherent customer strategy. And they're looking for a new way of doing that. And that's the observations that led us to build Flex, to build a more flexible in-the-cloud solution that allows developers to go in and really integrate Flex with other systems and build a much more integrated approach and not be locked in to the features and functionality that were in the box when it got delivered to them, but rather to take that as a baseline and then go innovate on top of that. Because companies who innovate in the eyes of their customers and the things that customers experience, those are the companies that tend to win. And so when we look at that playbook that we did with Flex, we are seeing opportunities to go serve customers across a wide variety of areas. We have talked about marketing. We see a lot of companies building new marketing solutions on top of Twilio, either on the SendGrid APIs or the Twilio APIs, in order to engage with their customers in the marketing stage. And so we're curious to hear why it is that customers want to go build new solutions, why the legacy marketing clouds may not be cutting it for them. We also want to hear about other parts. And I think we've started -- one of the things we've talked about in the past is like field service is an area where a lot of companies are building on top of Twilio. And I think Frontline actually starts to get at that problem domain. And so these are just all areas, in the fullness of time, we -- our road map entails that we -- as we hear these problems, we feel an obligation in many ways to our customers to go solve the problems that customers have in the world, and we have this great vantage point to see the areas of customer engagement where every company struggles because they use our platform to go build a better solution on top of it. And so when we see those opportunities, there may be -- when we see those opportunities to serve our customers, those may be accelerated by some inorganic means. But no specifics, obviously, to share, but we're always running an active game board to ask how can we accelerate.

Great. Our next question is from Ryan Koontz. Jeff, how do you expect RCS to roll out in networks and consumer devices? And how will this affect Twilio's core messaging business?

Thanks for the question. RCS is interesting. It's exciting in the sense that RCS enables a whole new set of capabilities inside of the messaging app, right? And so if you think about the world, it's like, well, there's certain things you can do in say, Facebook Messenger or WhatsApp, and then there's sort of like the dumb universe of SMS, if you will. And that's because the SMS protocol is like 40 years old. And so what RCS is, is really an upgrade to the SMS protocols to give it some new tricks, to enable commerce to happen inside of SMS, to enable photo care cells and advanced capabilities and like recommended next action buttons that make it really good for bots and marketing and all sorts of interesting things. And so there's a lot of excitement about the potential of RCS. Now the challenge of it is that you have to convince, what, a few thousand carriers around the world to upgrade systems, to adopt the same standard, to not deviate from the standard as they roll it out and to build an interoping and working ecosystem. And that's a big lift. Carriers, to get that level of cooperation, typically takes a lot of time. And so while we are excited about the technology of RCS and what it can unlock for our customers and new use cases like doing commerce straight inside the messaging app, we know that it's a long road to get there. And so what we're doing is we're working with our carrier partners. We are having active conversations to understand where they're at in the process, seeing how we can help, seeing how we can be a part of bringing the B2C, like the businesses want to engage with customers to the table because I think carriers' first instincts in something like RCS are to think about the consumer to consumer. So you texting with your grandmother, let's say, that's the first instinct that they have. And what we are a great partner for is we have this great ecosystem of more than 200,000 companies who are using Twilio to engage with their customers. And so we bring that needed perspective as well. It's a good collaboration, I just think it's a long road. And I think the carriers kind of acknowledge that. They see it, too. And so we're cautiously optimistic about what RCS can bring to customers. But we also know that it's a long road to get there. As far as like other impacts, it's a carrier-provided product, and it will have -- we expect economics similar to SMS. And so we believe that, essentially, we'll be able to unlock -- and all of our carrier relationships are a great asset here, and that we'll be able to unlock more capabilities for our customers to do business inside of messaging. But it's not -- it's an economic model that is quite similar to the one that we have with SMS.

Great. This is a question that came up for George that we think was probably better suited for you. So Twilio Showcase lets customers contact partners, but do you plan on building a curated app store where customers can buy and use apps built by other developers?

Great question. You should have asked George that. It's a great idea. Obviously, the idea of being able to seamlessly buy a solution from a third party, plug it into the Twilio platform and light it up with some simplicity is an attractive idea. And I think an ecosystem like that is definitely an interesting one. It seems like we are in the first steps right now of trying to create that ecosystem, of giving partners visibility, enabling commerce to happen. But I would say that an ecosystem like the one that you -- what you described is certainly of interest, but we're at the early stages of building a platform that's capable of creating that kind of ecosystem.

Great. Next question is from Mark Murphy. Are customers asking you to provide them a customer 360 type of capability, not just across messaging, voice and email, but essential repository to understand customers across all other contact points, like website, CRM system, e-commerce, et cetera. Is this an opportunity that's attractive or better to hand off to others?

That's a great question. If you want to engage your customers, you need to know a lot of information about your customers, and you need to not just treat them like a row in a database, but you need to personalize and individualize those communications to make them relevant. And so as we talk to customers about their customer engagement strategy, it's true that a lot of customers are saying, they are struggling to build a cohesive picture of their customer. And so we are hearing that as a common problem that a lot of companies, especially bigger ones with myriad systems or they've integrated acquisitions of their own, and so they struggle to get all these systems talking together, it is a pretty common problem that we see out there in the world.

Great. Next question is from Brent Bracelin at Piper Sandler. So kind of a positioning question. So you've gone from customer engagement platform or 2 customer engagement platform from a communications cloud. So how should we interpret the products messaging that has more recently centered around customer engagement? And have you refined the thinking around what parts of that communication stack you're going after?

Well, if you think about -- we started life as a communications platform, and that's obviously where we began this journey. And what we've come to realize over the course of the last 12, 13 years while building Twilio, is that the most strategic communications that a company has are those that it has with its customer. And that comes from observing how customers are using our product. And you think about there's all sorts of things that companies could have built using Twilio but didn't. And then there's all sorts of things that they have gone crazy building. And when you really look at the pattern, the things that companies really feel they need to innovate on is in their B2C communications. So how you use everything you know about your customers and how creative you are, how well you listen to your customers and understand their core problems. And then they'll build that in a way that touches customers, that makes their experience better, that is one of the most strategic things that companies do. And so as we've taken and layered the next thing on top of our communications platform is a customer engagement platform to use our communications in the way that our customers are already showing this as most valuable but helping the customers to accelerate their building and to get even better outcomes and to integrate these various parts of their customer engagement together. And I see this tremendous opportunity in customer engagement that is additive to our opportunity in communications itself. And so as you think about the story arc of the company, I think Act 1 is communications and Act 2 was realizing how a particular kind of communication is even more valuable and is much more strategic than some other kinds of communications. And we're double-clicking there, and that's where we're layering on Act 2 in the company. And we couldn't be more excited about that. I think our customers are, too if you look at the proof points. Several years ago, before we started talking about customer engagement, is really what this is all about, I don't think you would have had John Donahoe from Nike on stage talking about Nike. I don't think you would have had Ed Bastian at Delta talking about Twilio. So you wouldn't have a John Donahoe talking about Nike because he wasn't there 4 years ago. But you get my point. You wouldn't have CEOs of Fortune 500 companies talking about the importance of Twilio to their business model when it's communications. But now there's customer engagement, it very closely aligns with some of the most important projects that are happening inside of companies. And this is something we've been talking about for several years on earnings calls and in my shareholder letters, about how customer engagement is one of the most strategic activities that every company is doing. And the way we've been building our platform over the past several years is very well aligned to that. And you see it in things like our SIGNAL keynote, where we're now really reaching into the C-suite, for people to sing our praises. And I think that's fantastic. And I'm so glad to be partnering and working with those types of people on some of the hardest problems that these big, very sophisticated and impressive companies have. I'm so glad to see that we can be a partner and be thought of that way.

All right. Next question is from Matt Stotler, William Blair. Do you plan to add the conference solution that you've built here for SIGNAL to your portfolio of customer-facing products?

I was waiting for the question. I don't know. I haven't looked at the code. I wouldn't be surprised if it's one of those like, use it once type of code basis, but I have no idea. Our team -- when you build a team of people who love code and love to innovate and you hand them a problem like, okay, we need to do a virtual conference in 3 months, and we need to make it as good as the in-person conference and as compelling and as engaging. And we actually set the goal, we said we want to be the best virtual conference of the year. And our team really took that mission to heart. And so I'm incredibly proud of what we did. I don't think we built it with the desire to actually productize it. That feels a little bit probably off the beaten path for us. But you never know, maybe we'll get a lot of people inbounding to us. So I wouldn't be surprised if there's an opportunity somewhere in our queue right now, like, hey, mind if we use this? But I don't think that's why we built it in the first place.

Next question is from Marcelo Lima. How much R&D effort is being made by Twilio to integrate the various solutions, for instance, e-mail, Flex, SMS? Or does most of this effort come from developers?

It's a great question. This is obviously an area where we take -- we are working with customers to understand how they want these things integrated. And sometimes it's in things like Flex. When you spin up a Flex instance, it's got all the channels like right there in it. And other times, it's more like at the API level, like when you think about like the conversations API, like it can pull together multiple different mediums into one sort of unified API. So there's a lot of different ways you end up expressing this idea of the channels coming together. And so absolutely, we are working with customers, understanding what that means to them, what are the types of problems that they want solved in a cross-channel or omnichannel way. But it's not like a one-and-done, like let's just throw out all the APIs into a soup and store it, you get the 1 mega API out. I think it's really taking what we have, talking to customers and often learning from a lot of the early customers that we have about, oh, yes, we put together e-mail and messaging and all this into this type of solution and learning from them about, essentially, what are the parts that are unique to their business and which ones really aren't. And which ones they would have liked us to pretty essentially bake for them. And so that is obviously an area where we are investing a lot of energy. But it doesn't always -- like when you say, like, are you going to do it? Well, we have been doing it. We've been doing it sort of all along. You just -- it takes different forms and different products, but that's absolutely the sort of fusion of these channels and making it so customers can build once on our platform and not have to worry anymore about this channel or that channel or having to expend a lot of new engineering work when they -- when a new channel comes along or new capabilities added to a channel. That is certainly part of the core mission, and that's what we've been doing with all of these products we've been launching for the past several years.

Great. Our next question is not surprisingly around Microsoft's recent announcement with Azure Communication Services. Curious about how you see their ambitions in the market over the longer term.

Yes. Thank you for the question. I'll give you the same answer that I've given over the many years whenever a competitor enters the market. Like when Amazon started building communications products several years ago, and Google did, when Facebook did, even when -- I remember when Blackberry dropped a press release on the morning of, I think, it was our first public earnings call that they were going to go take down Twilio. And so it's sort of the same answer. First of all, it's a huge market. So of course, there's going to be competition. And that doesn't worry us because, second, we're no stranger to competition. And the reason we continue to grow so quickly despite various kinds of competitors we've had over the years is our differentiation and our focus. It's in the breadth and the depth of the complete product suite we have. It's in our relentless developer focus. It's in our super network, in building that flywheel, which continues to grow, which you've seen, by the way, has been on fire lately, fueling that acceleration of growth, especially in messaging. And last, I'll close with we really don't focus on competitors. Like, yes, we're smart. We're aware of the competition, sure. But we focus on customers because they guide the way. And I think a mistake a lot of companies make because is they focus too much on competitors as opposed to focus on customers. And so we focus on customers. That's what we're doing, and we're going to keep building. And it's a big market. And so I don't really particularly worry about any one company entering this space, just like I don't particularly worry about any of those others who have been in this space over the many years.

We have a couple of questions around your keynote yesterday with the demo of OpenAI writing Trimble code. Guy Tartakovsky and Alex Zukin both brought this up. And is there a broader opportunity to build sort of a no-code, drag-and-drop AI-based solution to expand TAM opportunities? And kind of how are you thinking about maybe even monetizing an AI-based product?

Yes. Well, I mean, I think to address the specific example you gave, I am a big fan of low-code and no-code solutions. That's why we built Studio, that's why we have Functions. Like there's a lot of different ways that gets expressed already in our product. But I think that there's a tremendous opportunity to continue growing that area because I think code should fundamentally -- building, I should say, should be accessible to a wide variety of builders inside of a company. And you don't need to necessarily be 1 of the 30 whatever million professional developers who are out to build things, especially relatively straightforward things. And so I'm a big fan. I'd like to say there's 3 types. There's low-code no-code and yo code, just for the people who love to write code. So I'm a fan of that. Now whether AI is going to be the thing that does that, it's very early days. And people since GPT-3 came out, there have been people experimenting as we did on stage with the idea that GPT-3 might be able to write code. And look, it can pull off a few simple tricks today. But I think even the folks at OpenAI would tell you that like, look, this is not ready for prime time and probably won't be for a very long time. But it can pull off a few interesting tricks. And so where it goes, nobody knows exactly yet. But the idea of actually unlocking the ability to build low-code or no-code solutions is definitely something that we're very interested. And if it turns out that some advanced machine learning is able to take some simple things and pull them off-the-shelf and put them together, that will be really neat. But I think we're probably still fairly long ways off from that, to being like building compelling business solutions.

All right. Next kind of set of topics. There's a few questions here that I will not inundate you with all at once, but it's around IoT. So from Meta Marshall, with increasing evolution towards customer engagement, how does IoT fit into that vision? Are those generally disparate customer sets?

The IoT world and the customer engagement world are a little bit different from each other. First of all, you've got sort of different types of developers. There's sort of the more hardware, e-oriented folks, which is different from kind of pure software folks. The development life cycles are different. When you write software for some cloud service, you kind of write code, you put it through your test suite, it looks good, it might go out that day or the next day or maybe a week later. Or if you're an early startup, you just push it out live in a minute. And so whereas when hardware, you do your prototyping and then you get it just right and then it gets sent off for design and manufacturing and production and distribution, and so a very different ball game. But the fundamental similarity in the way in which we're using some of our core competencies here to solve a different set of problems is: number one, obviously, with developers; number two, is abstracting tremendously complex systems, whether with the super SIM, it's the global network of carriers that you might have to interop with your solution and to like get it under those networks and to do the certification, and all that kind of stuff, or to strike economic deals with all those different carriers, let alone kind of optimizing it over time and making using software to drive it to be more and more efficient over time. That's something we've been doing for 12 years with our super network for voice and messaging and to be able to do it again for IoT is just really leveraging a lot of the competencies we already have. And then the second thing is enabling innovation by lowering the barrier, making it easier for folks to do this kind of work, really making better products emerge, letting new use cases emerge that might not have emerged otherwise. And that's really at the core. And the way I think about it, if we started Twilio 12 years ago with voice and then messaging and then chat and then video, and what that led us to the doorstep of is the next great opportunity in customer engagement, IoT is like starting the next platform. And we launched our IoT product several years ago, and that was like the 2008 moment for that world. And as we continue to grow the IoT product road map, I think we're going to continue to see, we're going to be able to look at how customers are using our IoT products, what challenges arise, what they have to go build on top of us. And ultimately, the business solutions they're trying to solve, and that will enable us to continue growing in this IoT footprint. And IoT is -- it's a nice market today, but it is still at its infancy. And I think that when most people think about IoT, they think of like their home and they think of they're like, I'm staring right now at an Internet-connected air purifier because I'm here in San Francisco where the air is bad today. I'm looking at my Internet-connected air quality monitor, you can see a trend here. That's what a lot of us think about when you think about IoT. But really, the biggest opportunity in IoT are a lot of these industrial use cases like automating factories or making our cities more efficient or transportation use cases. And actually, there's a strong case to be made that IoT is going to be a big part of negating climate change because when you are able to track conditions out in the real-world and adjust accordingly, you can actually make a lot more efficient use of resources. And we've already seen that. I don't know if you remember a couple of years ago, when we announced super SIM, we had the company that was doing the Internet-connected garbage dumpsters. And it was kind of a funny product to launch with. But when you think about it, they're able to make the garbage pickup routes a lot more efficient because it's actually measuring if there's garbage in the bins and if the trash needs to get empty. And so there's a lot of these use cases out there. So I still believe IoT is the very infant stages of its -- of this market. And in particular, what we found, and I say we build one thing, and that just leads us to the next problem that we can solve and the next, we provided the connectivity solution with our super SIM. And of course, we have the narrowband product as well that provides lower battery and much longer life solutions and low bandwidth and low-cost solutions. And then that led us to understand, yes, we love the connectivity, but we're going to be spending the next year, just trying to get the firmware to boot up and like building all the stuff in the guts of the device. And that's what led us to launch the Microvisor product that we launched, which drastically simplifies the building, debugging, remote supporting and remote update deployment capability for IoT developers, which I think removes a big stumbling block that a lot of companies have to getting a product into market. And so yet another great opportunity that our customers have shown us. And so I think about that as being the next big market, and we think that can be huge. While most of the thrust of the company is in customer engagement and the communications underneath it, we have this great new initiative that's been running to tackle the emerging IoT market. We can't wait to see what the world builds with it.

Great. Next question from Mike Walkley. With COVID-19 accelerating company's digital transformation plans, is Twilio seeing a change in customer usage patterns? And is this leading to a shift in investment priorities. So what are your key focus areas of investment over the next 12 months, considering that we -- as we talked about, we were a little bit behind on our investment plans for this year in light of COVID?

Yes. It's funny. I mean if you imagine like a nuclear power plant, like dashboard in front of us when COVID started, you would have had every dialogue going some way or another. Some of them going way up, some going down, some going sideways, some of them blowing up, like it's a wacky year through all the usage patterns in the flux. Some companies where we saw usage patterns going through the roof. Other companies and other industries, you saw like declining massively. You saw net new use cases coming about. New products like video taking on a whole new set of use cases and growing faster than we've ever seen it grow before. And so of course, that has impacted our investments. Some products, we are investing in scale and growth and things like that. Other ones, you see different features and capabilities that might be needed for the changing world. And so sometimes there's road maps that change to address that. Like, I know our Flex team invested a lot of cycles this year to make sure that the contact tracing use case would be successful on Flex. And that's just like an interesting example that, I think, has more to do with pride that we could play a role in contact tracing and helping the world open up again as opposed to being a long term. God, I hope we are not doing contact tracing for many years in the future. I'll put it that way. But sort of impacted our road maps and -- but I think that what you're seeing, like, these aren't major deviations. It's not like we were going in one direction. We were going north and suddenly, we had to go south. This was the path that we were already on. As for our customers, they were already on most of these paths, it's just priority shifted. And when the priority shifted, our customers and a lot of these projects for customer engagement took on a lot new life and a lot more vigor and had urgency to them. Well, then, obviously, we're there to help our customers. And for the most part, we have the product that our customers have needed. We were fortuitous in the fact that we rolled out HIPAA compliance and the ability to sign BAAs just prior to COVID landing, and that had been something we've been working on for, gosh, at least 12, 18 months before the time we launched it, that's a big lift. And so being able to support those kind of workloads. But we did accelerate the HIPAA road map after COVID to enable even more products, to be under the HIPAA compliance umbrella as a result of COVID. So yes, we've accelerated some of these efforts. I would say it's not like a left turn in any way. It's more an organic, like refiguring of some of our priorities and road maps. But all stuff that I would say is the right things for us to be focused on for the long term as our customers are accelerating their own plans, in customer engagement. And we're asking ourselves, how do we support them? How do we get this business? How do we forge new and more strategic relationships with these customers because these projects are so urgent and critical for them. Let's be there for them. Let's be the trusted partner, and that will open the door to even more business as time goes on, and I'm excited to do that.

Great. Our next question is from Anouk Dey at Endurance -- or sorry, at Durable. 2 years into Flex, what have you learned? Would you rather go deeper into Flex or focus your time specifically on introducing another application?

Thank you, Anouk. It's -- I mean, I think the answer is it's both, right? We're always -- we put a lot of focus and energy onto our existing products. And Flex is still very early in its life cycle, right? It's a huge market. And the product is off to a fantastic start. We've got great customers on it. And there's, of course, still a lot of building that we're going to keep doing. And at some point, when I spend my time, I tend to focus a lot on getting the directional energy right. So very early on in Flex before we launched it, or in the very early days. It was in alpha or beta or whatever it was, I'd spend a lot of time with the team to figure out like, okay, what does it mean to be a Flex? What does it mean to be a programmable contact center? What does that concept even mean? How are we going to fulfill on that promise to build great APIs that allow developers to do their work while still developing something that feels like a solution when you stand it up? And so we got a lot of those things right, I believe, in the first generation, because we spent a lot of time. And now the team is taking a lot of direction from customers and hearing feedback and building a lot of those features that customers need. But the really important bones that you need to get right at the beginning, I feel like we did with Flex. And so that means that I'm able to spend a little less time than I've spent with Flex in the very early days, and I get to focus on a variety of other things. And at any point in time, there's a variety of things that we're working on that we think could be interesting. There's always a bunch of things we're working on. It turned out they may be nothing. And we may never launch them. And then there's other things working on that we think could be big opportunities. And so that's how I like to spend my time is to dial up my time in the early days, at the inception phase when you're making sort of key decisions that you'll live with for the next decade or two. And then as we hatch something, we're able to spend less time because customers often help you guide the road map from there.

All right. Our next question is from Brent Bracelin at Piper Sandler, titled Video Killed the Radio Star.

Nice.

Video is really taking a hit in the midst of the pandemic with prolific new use cases.

Hold on. I've got a new -- I've got like a new setup here as so many people do for their like Zoom stuff, and I've got a button here, hold on. I don't know if you can hear it. I can hear it.

Yes, it's coming through.

Did I hit the right button? Was it the applause button?

It was the laughter button.

The laughter button. Sorry, I meant the -- I didn't mean to laugh at you, but I meant to applaud you. That's a great -- I love that, Video Killed the Radio Star. Okay. Let's move on.

So we've seen prolific new use cases in telehealth apps powered by Twilio. It comes a couple of years after the first introduction of the video API. So how important is the new WebRTC Go API in further accelerating video consumption on the Twilio platform? And do you look at this as one of the bigger new product announcements? Or if not, what do you think is one of the bigger new product announcements?

Yes. I mean I think as I talked about -- yes, I went through some of these earlier, so I won't totally rehash it. I think WebRTC Go is a great product. Because I want to onboard many developers who might go look at WebRTC is just this thing that's already built into the browsers and say, well, that's all I need. Like I've talked to so many customers through the years who we've said, oh, you should use our video product like, well, WebRTC is free. And I'm like -- but we tell them like, you know all the hard things you're going to be dealing with over the years. If you succeed, like there's a lot of rough corners to that thing, all the browser versions you have to test. All the network conditions you have to account for, all of the instrumentation and visibility into what's happening that you will be flying blind with that you won't have. So when customers right into your support, the video didn't work, and you're like, well, I don't know why, why don't you restart your computer, right? Like there's all these things that we've solved and there's always this tension between. Well, but it's free. So let's -- we'll get started with it. And so what I like is that we've resolved that tension or made it, so like, look, there's a product that supports you in adopting this free technology. And the reason -- it's for you, by the way, I should preface this. When you do a one-to-one call between like, let's say, 2 web browsers, or 2 mobile devices or whatever it is using WebRTC, like you're not using pretty much any centralized infrastructure. There's very little by way of like resource consumption going on in a server somewhere. There's like the bandwidth is really just your like home Internet connection or whatever. It's not really using resources. And so like it's kind of by its very nature free, and that's why it makes sense that like, yes, well, that shouldn't cost anything. That's like charging me for air, which actually I would pay for in San Francisco right now. But like -- so it makes sense. Like I don't want to -- like I wouldn't argue with a developer saying, no, no, no, like the air shouldn't be free. But what I will say is there's all these hard things you then have to go solve for, and that's what our product wraps around the sort of core technology of the Internet now. And so what I like with what we've done is we tried a great on-ramp. We made it so developers don't have to pick between well, WebRTC is free, but Twilio has solved all these problems. They kind of get the best of both worlds. They kind of get a light version of our product. And for the one-to-one use cases, it is free like as it should be, basically. And I think what that will do is provide a great on-ramp. I think many more developers were getting exposed to Twilio. I think that some of them will then realize that they should buy these other resources that surround the product and pay for those. And then you get others who will say, "Oh, I started with 1:1 use case, but then I realized I needed a 2:1 or 3:1, or a 5-way or a 10-way or a 50-way, and then there's a great -- okay, great, that's an easy transition into our other products, which those other use cases, by the way, do use server resources, do use our bandwidth. So there is a cost. Whether we bear it or the customer tries to go build it themselves, somebody is bearing a hard cost to serve those use cases, and that's where we saw even harder problems for our customers and where it's a really great set of use cases. So I think that WebRTC Go finally resolved some of the tension between, well, there's a sort of free thing that's just kind of built into the Internet at this point, as opposed to a vendor solution, which costs money, but it solves a bunch of problems. We've kind of resolved that tension now. And that I think will net us just a much bigger set of developers using Twilio, which will lead to great things. And as far as the other products, I mean, I kind of rehashed them before. I'm particularly excited, I think Frontline is neat because it opens up a whole new audience. And we see a lot of customers like Nike, building this on top of either Flex or some people are building on top of Conversations. And before we had Conversations, a lot of people have kind of built it themselves and in their own ways. And so I think this is really solving a problem that we've seen across many, many industries to provide a way for those frontline workers to digitally engage with customers, whether it's those delivery drivers or the restaurant workers or the field service technicians, like there's so many different variations of people who aren't at a desk who are interacting with you from a company that now we've got a great solution for. So I'm excited about that. I found the right button, you want to hear it?

Yes.

It's funny I can't hear it, but I assume you all can.

Yes, we can. Next question is from Michael Turrin. The -- Event Stream's announcement grabbed our attention. Can you expand on the sets of data that Twilio collects, the value of that data -- that data can provide your customers in ways that you can effectively monetize that, whether it's event streams or cross-channel orchestration or some other application.

So Event Streams, I feel like we're finally working with customers, figured out the right starting point to help customers get value out of all the engagement data that Twilio generates as a result of how customers are using Twilio across all of these different channels. And so that's really the first step. And I don't want to go too far into the future. But like this is, I would say, the beginning of a road map where we are helping customers to make sense of their engagement data, about things customers are saying to them or what they're saying to their customers and starting to help customers use that data to make smarter decisions, whether it's about which channels are working, which messages are working or which channels customers prefer to use, really bringing all that data together into a feed that allows them to consume it, make sense of it, is the first step. And we listen to customers and let them guide the way for how we can take that product and continue to expand it over time to get more and more value for our customers out of the engagement data that Twilio sees. And you can see -- I think we said in the investor presentation that we powered -- was it close to 1 trillion human interactions, right? There's a lot of data about how companies are talking to customers. And most companies don't even have a way to look at all their own communications in one spot that will make use of it. So the first step is trying to give them a way to actually get a handle on all that data.

Great. A question from Alex Zukin. Jeff, you guys have laid out a great framework for both high-growth and long-term margin targets. But I guess, at what size of revenue do you feel it's appropriate to start putting up some good operating margin leverage and even getting into the double digits?

Thank you for the question. Not a -- maybe a new question. Look, I think it's the same thing that we've really said all along. We do believe there's a great long-term model here with 20%-plus operating margins and 60-plus percent gross margins, all those things. But what we are doing is investing for growth. This is a huge market opportunity. I think that the engagement, whether it's communications or the software engagement is one of the largest, if not the largest opportunities in enterprise software. And so when you're looking at an opportunity this big, you are not just inclined, you almost feel obligated to invest to really capture this opportunity. And so we remain focused on growth. That is our main priority. We are not a company that invests like at all costs. We are prudent with our investments. We make wise investments. I think like some of the stuff we've talked about, like the investments in go-to-market that we've made over the past several years are working very nicely. And so we keep a close eye on whether those investments are the right ones. And we continue to invest, and we see a tremendous opportunity to play the long game here and to win this world of customer engagement. And so that's what we're doing. So I don't want to give you a time frame or a dollar amount like because, to me, that's not how I look at it. I look at it as we have an opportunity to unlock growth outcomes for a long period of time because we have a huge market and a very big opportunity ahead of us, and customers illuminating a path to continue to have elevated growth. And that's what we want to do.

Great. I think we'll do one more question to wrap things up, and it comes in from Derrick Wood at Cowen. Twilio has been a big champion of build versus buy. George spoke to how some customers had existing solutions that chose to rip and replace with Twilio because of the additional functionality and customization that can be built. So do you think COVID is becoming an accelerant for this build versus buy way of doing things? And is this something that could resonate up to the CIO level?

I think that -- I think there's 2 big trends happening. First is that engagement needs to be built to some extent. If you think about like a lot of let's say, B2B companies or even like back end systems, like maybe an HR system, like standardization is of great value. So buying an off-the-shelf solution and then getting best practices built into it is a value that you get actually when you buy something that's like a bought product. But when it comes to engaging with your customers, especially if you're, say, like a B2C company, that engagement is really how you differentiate. So imagine your bank or your -- an airline or whatever, pick your industry. And they've all bought the same solution, plug it in, then in the eyes of their customer, the experience is undifferentiated. And so eventually, a digital disruptor comes along and builds something that really listens to customers, here's what they need, iterates on it at the pace of software, deploying updates all the time and is really innovating, well customers will start to flock towards that. And that's why I say it's not build versus buy, it's build versus die. Because the company who's able to listen to its customers and be agile and solve customer problems because they have that muscle, like those are the companies that history has shown tend to win. And so I think more and more -- and that was kind of the hypothesis that we had back in 2008 when we started the company, and I think it's largely played out, right? You see some of the biggest companies in the planet, legacy companies have been around for 100 years or hiring armies of developers and building software practices and competing in this new digital frontier. And the second thing I'll say is that -- the second thesis or whatever is that agility is key to that. Because agility is the ability to take new information, a changing market, a changing competitive dynamics, changing customer preferences and to turn it into new solutions and turn it into new ideas. And that agility is what is needed in this digital era because the pace of business, obviously, is accelerating so much. But what COVID has shown us is that the value of agility and the value of being able to see a problem and have the muscle to be able to go solve it by building something is so important, because that was a muscle that was needed by nearly every company this year as they had to reinvent themselves to a new set of conditions in the world and respond and build their way out. And so that's why it's so exciting to be where we are in this moment is because, I think it was clear to most companies before that you can't just buy everything and expect to have a differentiated outcome, you need to build. And you don't build everything. You build the things that customers care about. But if you don't -- I think what you're seeing in COVID, by the way, is a bifurcation of the companies who really had like zero muscle in this regard. I think a lot of those companies are the ones that you see are not making it this year. And the companies that had been investing in digital transformations and have been building software development teams and have been focused on agility in adopting platforms like Twilio, those are the ones that when COVID hit picked up their tools and started building. And those are the ones -- all those calls, that I was getting that weekend of March 13, that I talked about in my keynote yesterday, those are the companies who were like, situation's changed, new reality we're facing. We're building -- can you connect me to someone? We need some help or some advice or whatever it is. Those are the companies that are going to thrive. And I would go so far as to say that I think those companies are much -- it's a really bad thing to say in some ways, but like they're almost better off because of COVID, because it forced them to sharpen their thinking and sharpen their pencils. And like John Donahoe was saying yesterday, they had digital. And then suddenly, they were thrust into a 100% digital business. And they were prepared for it. And now they're even more prepared for what's coming in terms of digital engagement, building those relationships and digital competition. If digital is the competitive battlefield, if you will, then those companies that had the muscle and used it this year and accelerated those plans are now, in some ways, in an even better spot than they might have been if it was like the business as usual world. And so -- and we're happy to be partnering and working with those customers every day.

Great. Well, I think that's a great way to end it. Jeff, thank you very much for joining.

Thank you, Zilli. Thank you for all the fantastic questions, everybody.

Yes. Thanks to everybody for joining today. We're excited to have had this opportunity to meet with you. Stay tuned. We'll be announcing earnings, obviously, in the next few weeks, and we look forward to catching up with you then.