Twilio Inc. (TWLO) Earnings Call Transcript & Summary

So look, we're just delighted to have Twilio joining us here today in San Francisco. Thomas is the Chief Revenue Officer of Twilio. He's been in that role for 2 years. So my plan is, since this is the first time that we've had Thomas here, we're going to talk about you a little bit. And we'll do that for 5 minutes. And then we'll talk about Twilio today and everything that's going on in voice. And then we'll open it up to the audience for questions. So, where were you born?

I grew up in Upstate New York, a place called Syracuse, talk about winners.

I grew up in Denver, Colorado. By the time I was 18, I shoveled my last slide, I'm going to call for you for college I don't care. I don't care. And then when you came out of school, where did you start?

I was fortunate enough to start my career at Cisco, great program for interns. And yes, I was able to move around the company, various functions.

Why don't you start out with the very first thing...

Actually, the first thing I ever did was I was in the office of the President as an intern when John Chambers was the CEO way back when and learned firsthand how he ran the company.

How did you get that?

Lucky. No, I just -- I happen to started my own company in college, and I think I got the attention of some people like as a kind of entrepreneurial and somebody in the office kind of took a liking to me, offered me a summer internship and never look back.

Wow, what was the company that you started?

It was basically the late '90s. So it was like building web applications online for small businesses around school, was help me pay for college.

Fantastic. Okay. So what year is it that you're doing the intern at John Chambers.

Late '90s. '97, '98.

'97, '98. What comes next at Cisco?

I just stayed there for quite a while. And I was in...

We can take the slow version. We got time. What came after the office of the...

Well, I did -- I was an engineer for a while. I did product management, in corporate development. But I spent...

And this is Cisco. This is Cisco's Heyday, right? People don't realize Cisco was Google...

Yes, this was -- valuable...

Cisco was anthropic, right.

It was a crazy time. Like we became the world's most valuable company for a month or so, and then it was the most humbling experience you'd never go through watching stock go down 90% and then take about a decade to kind of get back to halfway where it was. But it was a great learning experience. I learned a ton from kind of navigating and being part of that journey. And I obviously watch a lot of other people that had very senior roles to play in that. But during my time at Cisco, I spent most of it as a general manager of different businesses, everything from start-ups within Cisco to multibillion-dollar businesses and just learned a lot from it. And then from there on, I went to more hyper growth companies like AppDynamics and then I went to an AI start-up for 4 or 5 years before joining Twilio...

It's people.ai?

Yes, people.ai...

And so Twilio, you landed in March of '24?

Yes. It's been about 2 years.

Okay. So I'm going to take a little detour here because I forgot that you were at Cisco. So as I like -- investors are so confused right now about how is AI impacting software, right? And one of the analogies that I make, and I'm wondering if you're going to agree with this analogy. As I say, if you look back at what SaaS did on-premise, AI is going to do something similar to SaaS. And the #1 software company in the year 2000 was Microsoft, They made it through just fine. The #2 software company, they sold a lot of other stuff in terms of the amount of software they sold was Sun Microsystems, the dot-com, right? Because [indiscernible]. And where did they go? Where they went is they struggled for 10 more years, and they got bought by Oracle for 0.6x revenue. That's what happened to Sun, right? So do you think that what we're going -- and so the punch line is, if you look at the top 20 software companies in the year 2000, 65% of them no one went bankrupt, but they went to 1 or 2x revenue and they got bought by Oracle or some P firm. Do you think that we see a similar level of -- is it equally hard for the SaaS companies to make through the AI era? What are your thoughts?

I mean I think it's a tough question. It may depend a little bit on...

Yes, I didn't prep you at all. I'm really sorry.

I think what we define as SaaS companies and what -- where they are in terms of the workflows in which they automate. So I think the companies that have consumption-based business models will be obviously a little bit easier in terms of making the adoption. Many of them have already started to. I also think that some of the software providers have very sticky whether it's proprietary data or connections to highly regulated environments, those particular areas are probably -- are going to be a little bit stronger. But that being said, I think it's tough for anyone to fully anticipate the power of what AI will do to any industry at this point. So from our focus perspective at Twilio is that whatever the application may be that sits on top of the infrastructure that we provide, we know it's going to require some level of communications and some level of personalization and those are the areas that we think we can help.

Okay. And so then when you joined in 2024, your first role was within segment?

Yes. I came in to help bring the segment business to profitability.

That was you. Tell us about that, let people know what's going on with that...

Yes. I mean look, I've always loved the product. That was a customer of segment for multiple places, whether I was a CMO at AppDynamics or Chief Product Officer at people.ai we were both using segment. And I just always felt like it was core to how we truly understand who our consumers were and when I -- the Twilio opportunity was presented to me, I just thought, boy, there's a lot Twilio could do if we could deeply integrate kind of the customer memory layer of what segment could provide deeper into the core Twilio platform itself. And I think the company hadn't quite done all the integrations that it needed to at that time, but I also know the business needs to be kind of put it back on to a more profitable trajectory and reinvigorated. And so for me to come in and to have a role to play in that was a lot of fun. It was a challenge at the time joining in 2024. There's a lot of questions about segment's business and the fit within Twilio. But I think over time, we've proven that core capability does matter in the AI era, and now we're building it natively into our platform.

Yes. I think you're good at this point. It was a rough transition, but I think you're good. And so the -- when did the -- how did you become the Chief Revenue Officer of the whole thing. So in October 2024 [indiscernible] take you to coffee or like how does this happen?

Well, it's funny is even Chief Revenue Officer is not really probably the best definition of what my role is -- it's -- in a way, it's the go-to-market organization, the global operations of Twilio is really the charter. And the reason why Khozema thought I would be a good fit for it was Twilio's own go-to-market is a transformation that we're going to kick -- that we kicked off about 1 year, 1.5 years ago and it's a lot of general management, which is really my strength. And so whether it's shifting to more of a solution sales motion, whether it's changing the way we do some of our back office capabilities, those are all transformational projects that are going on at Twilio over the last couple of years. And so when we decided that it was going to be important to take the segment sales organization and the communications organization, which were 2 different business units merge them together, integrate our R&D organization into building one integrated platform. We wanted to do the same for the go-to-market organization as well. And so it was sort of a natural...

I didn't realize, so there were 2 R&D organizations before and you put them together. How does that go? How do you do that?

I mean we did that at the beginning of last calendar year and it's gone really well. Like the integration has gone well and that's why you're starting to see a lot more of our products more seamlessly integrated, some of the solutions that we've brought to market recently and will bring to market over the next couple of quarters. You're going to see a lot of that core capability becomes less of a loosely connected, but much more deeply integrated set of services and customers have been asking for that. And so for us, this is a great time to deliver on that promise.

All right. Awesome. Okay. So then my standard question is how's business? What would you say?

I was told you might ask me. Listen, I think it's -- business is going quite well right now. We just -- we did our earnings call a couple of weeks ago, but on balance, from a growth perspective, this has been one of the most balanced and strong quarters we've had in years. And whether it's -- we look at really 4 key growth levers for Twilio that we're focused on. The first is the self-service business, and that grew in the high 20s. Our partner in ecosystem, our ISVs have been incredible growers for us in the high 20s as well. We had strong balance in our international regions. And we've seen really good cross-sell and upsell momentum. In fact, our multiproduct customers were up 26% year-over-year. So whether it's the existing growth levers, whether it's the new business motion between our self-service channel and our direct sales model, we've seen rapid acceleration in our best new business quarter in multiple years. So in general, feeling pretty good about the setup going into 2026.

Yes, it's the right time to be having to do this conference and answer that question. So if self-service is in the high 20s, partners in the 20s, multiproduct, you say it was up 26?

Yes, multiproduct customer accounts, that's the way we measure.

So -- and overall growth, I think, was 14%. So what were the things that were weighing it down. So what are the things that are not growing as fast?

Yes. I think it's -- if you look at just the way the business is set core messaging, I don't know the exact -- I don't remember the exact number, but it's -- I thought it was in the mid-teens. Voice was an accelerated much higher than that. E-mail was a little less than the company average, but part of that is we're going through a bit of an e-mail transformation. The core e-mail business is growing at the company average, but we're deemphasizing one of our SKUs in e-mail, it's the marketing campaign SKU. It's something that's not a strategic for us anymore. So that's a little bit of a drag on the growth rate there. Segments growing below the company average. But on balance, the primary things that we're looking at, the channels themselves, whether it's voice, messaging, RCS, e-mail, but more importantly, the software add-ons, the high-margin products that sit on top of those channels, those are all growing north of 20%.

Awesome. It's really great to see this business come back. So we help take it public. And in the early days, it was -- we have more leads than we can respond to. Right? And that got you to several billion. And then segment happens and things kind of slowed. And now it feels like with voice, maybe you're kind of getting back to that we have more leads than we can respond to at least in that area. So help us understand what's going on with voice, a, in the industry, we have Sierra presenting here later today. And a prep call, they're like, I forget what the percentage like 90% of everything they're doing is the voice right? And but then also help us understand why it is that if you're using a voice agent, you need Twilio, right? Even if the voice agent comes from, say, ElevenLabs, let's do the industry first. What's going on with voice?

Yes. Well, just in general, I think we all realize that the voice is having its renaissance in some ways because the user experience of how agents and applications are being built from scratch is changing. Voice is becoming a far more prominent way of some -- and unlocking a lot of the use cases that customers have struggled with in the past. One of the most obvious ones is customer care. It's like how could you scale your customer care using virtual agents and voice is the way a lot of cases get resolved and being able to connect a voice agent to a large language model with persistent memory is a use case that customers care a lot about. So more broadly, there's just a lot of more inbound demand of voice. And I think immediately, people think it's purely just the AI start-ups. And the AI start-ups are absolutely a catalyst, but it's not the only catalyst for voice. We're seeing voice acceleration and strength with our traditional ISVs as well. Many of the software providers that are even public today, the SaaS companies, they're embedding more voice capabilities into their products because they need to modernize and make those products more AI centric. We're also seeing traditional enterprise customers, want to rebuild their way they do outbound marketing or customer care and they're using kind of building your own voice systems as well. And so the combination of all of those 3 cohorts has brought more acceleration to an interest to our business. Now from a voice, where does Twilio, how perspective...

If you have an agent, you still need a phone number, for example. You still -- is that a good -- is that true? like that's a really easy message to convey to an investor, right? just because it's just because AI agents still need to phone number.

Yes. Absolutely. It's a very basic thing is you need to be able to connect to the carriers and connect through a phone number, and Twilio provides the comp -- masks all the complexity of compliance and carrier infrastructure. We've got thousands of carrier connections globally, and we've been doing voice for years at scale. And so the ability to become compliant with those phone numbers, the ability to make sure that you can protect them from account takeovers and fraud prevention and there's just a lot of complexity around quality. And so customers -- if you're a new AI startup or even an enterprise customer, you're like, look, I don't want to deal with any of that complexity. Let me just plug into the Twilio APIs and have them solve that for me, and I can go verticalize my voice application with a proprietary user experience or a workflow that's specific to those problems that they're trying to solve. And so what we see is we're definitely like the core of the infrastructure of those voice services. And then increasingly, a lot of our customers are adding some of our AI capabilities on top of our voice channels to make their products even stickier. And so we're seeing good growth there as well.

Okay. So tell us something besides the phone number, what else do you need, and then let's talk about the AI capabilities a little bit.

Yes. So you basically need the ability to handle the voice orchestration and the conversion of speech to text, text to speech, the ability to connect it to a large language model, the ability to detect things like sentiment analysis. The ability to connect that to what you might also be hearing across other channels, whether it's messaging or e-mail or RCS. And so what customers are looking for is a platform where they can just plug into an API and you can get the combination of branded messaging from traditional messages like RCS to a branded voice application to branded e-mail and have consistent conversational insight layer above all of that orchestrated by a single agent infrastructure, and that's largely what Twilio provides them.

Yes. You mentioned new products that are coming earlier. What's coming that you can tell us, obviously, what gets you excited about -- big picture...

I mean I can't get -- public announcements, but I think we've been talking a lot about adding more seamless integration of our core channels and more orchestration and more customer memory layers on top of the Twilio platform. So you can expect to see us talk a lot more about that over the next couple of months.

When signal.

It's in May. In San Francisco.

Okay. And it's here. Where are you going to do it?

Good question. I don't know the answer.

What are you seeing in banks since we're a bank, right? What are you seeing banks do with voice?

Yes. I mean we're seeing some really interesting use cases around mortgages. For example, like the consumer mortgage application process. It's a good example where...

I can apply for mortgage by talking instead of fill it in no way.

Well, you can do a combination. So what typically happens with mortgages, we all know it's a complicated process that usually takes a couple of steps. Some of them are can be automated. Others require underwriting, evaluation by a human, and maybe it takes a couple of days to get approvals. And so that's a great example where you can come to a bank website online, you can begin a process of applying for a loan using a virtual agent through whether it's voice or messaging to be able to connect to you and knows you already because of the relationship you have once you log in, you take that persistent memory, it helps fill out the forms for you. If you need to escalate to speak to a human representative because you have a very complex situation, you can escalate in context to a human all through the Twilio experience. So that's one where we've seen a lot of customers that have been using that as an outbound way to generate new revenue streams through voice agents.

That's a great one. Okay. Any questions from our audience? Sure in the front row.

So we're seeing that voice is really hot right now, which we can see with the startups like ElevenLabs. And then like you said, Sierra [indiscernible] voice. But my question is what comes after voice, do you think? Do you have these go e-mail capabilities? Like is there a way that connects AI to those?

Yes, absolutely. So I think the way we think about it is there's a lot of interest right now, specifically on the voice channel, as you said, and there's an ecosystem of AI start-ups that have been building apps on top of the voice channel. But what they're also realizing is that customers want to take that conversation from voice to other channels as well, and they want to do it in full context. Sierra is a good example of that. We've got a great partnership with them. They've been a great customer for us, and they're expanding beyond voice to other channels as well, like RCS, WhatsApp, et cetera. So go back to that mortgage use case. The idea of the mortgage is you might have that voice conversation, but then you want to follow up with a confirmation, the e-mail or maybe an SMS 3 hours later that requires an approval just to kind of get through a process. Doing those individual channels in isolation doesn't allow you to have an integrated experience with one single memory with one single orchestration layer. And that's why Twilio is looking at it from much more of a multichannel model. But as we said, a lot of customers really just get started with one channel and voice and then they realize they got to do these other things. And what we're seeing now is some of our early voice customers were expanding to other channels.

Back there. Go ahead.

So the 3 big multipliers have increased their [indiscernible] recently. Have you seen a change in customer behavior related to that?

We have not. There's been no material changes. Customers don't like it when the fees go up, but they've not necessarily changed their spending patterns or behaviors. I will anticipate if they continue to go up higher and higher, you might start to see customers move to other channels within the Twilio platform. But for right now, we've not seen it.

So when you please? We have to remember to repeat the questions, by the way. Yes, I get.

In this new world of agent to agent communication no human in the loop, how does Twilio is reinvent?

How do we reinvent agent to agent communications without...

Not a human agent...

Well, there's nothing in our current workflow today that requires a human agent to be in the loop. It's purely something that an enterprise can decide whether they want to or not. The way we're connecting our agents together is there is orchestration layer between various agents. And because we're so API-centric leveraging MCP protocols and other things, it's actually pretty easy for us to do that. What we find is that customers for more complex use cases in enterprise, want to make sure that the agents are interpreting things correctly. A lot of the rules and business flows were deterministic in nature. And so having a probabilistic model that it is and have any sort of checks and boundaries, some customers are a little concerned about that right now. So I think the bigger issue isn't the technology. It's much more around the business process and the governance of what are you going to allow these agents to do in the enterprise. But in terms of the small business and start-up land, they're already like just going all in, but their governance models are far more reduced because of what we see in the banks. For example, they have much more structured rules and regulations about the agents.

So a lot of easier when you're starting from scratch. [indiscernible] in San Francisco, they just go so fast because there's no baggage I know there's no baggage, all right. We'll do a short version of this. What's the competitive environment like? Who do you actually compete against now?

We still have our own -- the traditional competitors that we have in CPaaS. And I think those companies -- we feel really good about the market share in those spaces -- as well. Right now, the world is changing, right? And so I think we have to be thinking about competition in a different way, and it's really actually unclear exactly where competition will emerge from, but our job is to focus on what our customers are asking for, and they're asking for a lot more than CPaaS from us. And we're just racing to be able to provide them the capabilities out of the box. And I think a lot of what we're trying to do now is just establish partnerships with the right players, the agent builders, the hyperscalers, the AI labs, the companies that are ultimately the origination point over a lot of these apps and agents are being built and making sure that Twilio is a default part of that experience.

That's a perfect place to stop. Great. Thank you so much.

Thank you.