Welcome, everybody. I'm Meta Marshall. I cover the communication software space here at Morgan Stanley. We're delighted to have Twilio here with us today, and Khozema Shipchandler, now CEO of Twilio. Welcome.
Thanks for having me.
All right, so maybe let's just start. You announced the completion of your strategic review Tuesday morning. Can you just remind people kind of the process that you underwent and just some of the major takeaways from the strategic review completion?
Yeah. So it was an operational review of our Segment business, right?
Yeah.
We considered a very wide range of alternatives, up to and including a sale.
Mm-hmm.
And what we concluded in the end is, is that where's the most value fundamentally for investors? What's the value in a sale today? What's the value of us keeping the asset? How does it perform inside Twilio? And what are the things that we can fundamentally do to improve the running of the business? So in doing so, what we said was, "Look, it's a different operating team.
Yeah.
We're gonna run this business with rigor, with discipline, and in so doing, we have an opportunity, we think, to create more value over time." That's done in part by keeping the asset, running it better. We're putting a hard target against ourselves to hold ourselves accountable, non-GAAP profit by the end of Q2 of next year. In addition to that, we think there's a lot of value to be created in combining the capabilities of Segment with the broader Twilio. In so doing there, we also indicated that there's three product launches that we're gonna release over the course of the year. Now, in doing the evaluation, we obviously... We led the review, like, internally, like, it was an operational review that we led. We obviously consulted with our board quite heavily.
But one of the things that was also important for us was, let's establish an anchor around the sale part of it specifically, and what kind of value potentially could be driven as a result of that. And so that was helpful in terms of just kind of third-party validation, using external advisors that are strategic and financial in nature. And then I guess the last thing that I would say is that running it with rigor and discipline is gonna help a lot in terms of not just the financial profile of the business-
Mm-hmm
... not just the innovation profile of the business, but I think, too, just in terms of the narrowing of focus inside of that part of the company-
Okay
... to be able to deliver on R&D priorities, to serve the 8,000+ customers that we have that are up and running on the platform, and then over time, to be able to add additional communications customers and enrich their workloads with data.
Okay. And so you just laid out that you kind of have internal targets, and publicly announced targets as far as the Segment business. And so, you know, is it, if you evaluate in another year, and you're not meeting those thresholds, you would consider again splitting out that business? Or just kind of how are you holding yourself to the targets that you've now laid out as part of the strategic review?
Yeah, I understand the question.
Yeah
... and I will answer it. I guess what I would say is that we feel really good about our plan.
Okay.
We feel good that we can, in fact, deliver against some of these-
Mm
... R&D priorities, that we can natively embed Segment inside of Twilio. We feel very good about our ability to deliver for customers in that timeframe. Our expectations around growth are actually relatively muted in terms of us being able to achieve our non-GAAP breakeven target. And so we feel very good about our plan, and that is absolutely, like, where we're focused.
Okay.
Now, to answer your question more directly, what we're open-minded about is, what's the best path to create value?
Right.
And so, as I said a moment ago, where we see the performance of the business today, a business that is not growing very fast, that's losing money, and our opportunity to fix it, we think that value is upside down today. Now, if it goes right side up at some point in the future, whether that's next year or three years, five years, we'll be open-minded about what the best path to value creation is there.
Okay. I mean, Thomas Wyatt was announced as the new leader of that business. Just what were you looking for in a leader? Why was he kind of the right person? And, you know, I think, for a lot of the investors here, appreciate kind of the break-even targets on that Segment business, but are looking to see what kind of can drive the re-acceleration of that business.
Yeah, I mean, I, I think ultimately, break even is just the first toll gate, right?
Right.
We ultimately wanna be able to regrow the business. In terms of Thomas, the reason he's such an attractive candidate is because his most recent experience is within the AI realm-
Mm-hmm
... you know, being able to do, develop workloads in the HR space, using AI as the mechanism to deliver those. He's personally a Segment user, so, in roles that he's had, both as a Chief Marketing Officer as well as a Chief Product Officer, he is highly familiar with the product, so it's not like he's got to get here and get familiar with what it is-
Yeah
... that we do exactly. And then, in addition to kind of his more start-upy experience, if you will, he's also got significant scaled experience, having done a variety of kind of within business roles at Cisco, as well as broader, roles at Cisco. And I think just he's got a resilience, a tenacity, and an energy that's required in this moment right now, where we all recognize what the challenges are with the business, but it's also important not to lose sight of the opportunities in the business.
Mm-hmm.
I think he's ideally suited to that.
Okay. So Twilio has undergone meaningful changes over the last 18 months. You know, there's been numerous RIFs, there's been a couple of reorganizations of business segments, you know, the departure of Jeff, Elena, along with other changes for yourself. Just how do you see Twilio and kind of the value proposition different than it was 18 months ago?
I think the way that we're running the company is fundamentally different. Well, I, I think you should take signal from the last eight weeks since I've been in the seat. Yeah, yeah, some of the players are the same, I, I acknowledge that, but the way that we're running the company is fundamentally different right now. We're running it with rigor, with discipline, with focus... I think it's not lost on me and, and my partners, in the business that our job is to allocate capital smartly. It's to generate shareowner outcomes that create value over time. Now, we're not focused necessarily, like, on one or two-day stock pops, but we're also not focused on the long term being sort of a forever time horizon.
Yeah.
I think we're really looking at it through the lens of: what are the things that we can meaningfully undertake in the short term that create value, and how do those steps then contribute to medium-term horizons in which we can create value as well? I think in terms of the focus of the company more broadly, there's not a lot of change there. It's just in how are we disciplined about doing it, you know? So, for example, in Segment, I mentioned the fact that we're really focused on a handful of R&D priorities.
Mm-hmm.
You know, as, as I started evaluating the business with the team, what was clear to me was they were focused on so many different things, it was almost like fighting a land war in Asia, okay? Like, there were, there was just... It was an unwinnable proposition, and instead we said, "Okay, look, what are the things that customers are asking for?" I went out and validated that through my own sort of dozens of conversations that I've had with customers over the last eight weeks, and we made those the R&D priorities. Those are the ones that lead to the highest impact in the interim. We highlighted some of those, and we posted those on our website. I think those are gonna be really important.
In the communications business, we took sort of the same tack, and obviously, now there's sort of a shift in how do we free up R&D capacity to be able to focus on AI workloads? I'm sure we'll talk about that.
Yeah.
With Segment sort of now at least settled from an operational review standpoint, having us put some markers in front of us around this is what accountability looks like to us-
Mm
... and hopefully it's, it's satisfactory for investors, too. Now, I can turn my attention back to communications, where I've not put in a leader of the business. Instead, I'm kind of running it in a flatter way. I used to be in charge of that business.
Yeah.
We took out a ton of costs, as you're well aware. Now, we've got to go re-accelerate the growth of that business, and that's the focus.
Okay. I mean, Jeff has been the face of Twilio for, you know, the last 15 years. How are you managing customers, employees, who might just be concerned about kind of the changes that the company is undergoing?
Listen, I've great, great admiration for Jeff, and he remains actually a very close friend of mine, and I think what he did for the company is incredible, and I'm very admiring, rather, of what he created. I think from our standpoint, we're kind of trying to reposition the company, sort of along the lines that I said a moment ago.
Yeah
... where the first 15-year act of this company was, in many ways, wildly successful. Now, you know, we went a little bit sideways in terms of our performance, and we've acknowledged that in terms of data specifically, so we've got to correct that, and we've got a plan to do so now.
Mm-hmm.
I think in sort of this next phase of the company, the way that I think about it is that there's more of a balance between growth and operating discipline. So it's not just that we're focused on... You know, if it was- if I can sort of crudely say that we were perhaps maybe growth focused at all costs-
Mm-hmm
... it's not like we're cost focused at all. Growth at this stage-
Yeah
... right? We want to be able to drive more balance. Now, to your question about customers and, and employees, so I've spent a lot of time trying to meet as many customers as I can, making sure that they understand that I've actually been around the company for quite a while-
Yeah
... that I understand both the strengths and the opportunities of the company. That they can hear from me, communicate with conviction, the investments that we're putting behind our innovation roadmap, so that they understand that I care about those things just as much as my predecessor did. And then with employees, I think we're just taking a slightly different approach. Like, my style is just fundamentally different than Jeff's, and, like, we're different people, you'd expect that. And my approach to employees has been be transparent, be straightforward-
Yeah
... be candid about both the strengths and the opportunities of the company, and I think that's really resonated. And, you know, customers are really excited about what we can do for them as well. And I think in particular, with the Segment thing sort of now behind us, we had sort of a number of customers give us a virtual high five afterwards, who are now ready and excited to get on the platform.
Okay. You know, I have long kind of loved the vision of Twilio. You know, this idea that you could have this differentiated platform, where you're enabling all of this communication, and then you're optimizing it, and then you layer on AI, and it just totally makes sense to me. But I guess, why has that been so hard to sell to customers? You know, why has that entire vision and the data and applications or that Segment business been as difficult to sell as it has been?
Yeah, I mean, I think in a way, what you're really kind of getting at is the combination of communications plus data, and how do you enrich communications workloads with data and obviously now AI, to be able to deliver-
Right
... customer delight. So I mean, it's kind of hard to sell it to customers when you don't have a product, right? I mean-
Yeah
... like, frankly, we have not executed well against that product roadmap. If you look back on the last three years that we've owned the asset, we've delivered one product, okay? And what we've now committed to is, is that over the next several quarters, with great focus, we're gonna deliver three, okay? And so I think that's gonna be a big unlock in terms of customers. Now, I think the other dynamic is, is that how do you break through these barriers of different buyers? Which is why we split the businesses in the way that we did in the first place. Like, Segment has a different buyer than does Communications. And so if you're a Communications buyer and we embed Segment native- excuse me, natively, what's important about that is, is that it's got to be easy, button, simple-
Mm-hmm
... so that there's no new work to go do to orchestrate Segment. Instead, it's, it's embedded already. You're using Communications, and in fact, it's so simple that we send you a report at the end of the month that shows you the analytics that we're able to create, shows you the efficacy of what's possible now versus what you were doing previously.
Mm-hmm.
I think that's gonna simplify it for customers as well.
Okay. So, I mean, just in terms of, you know, part of what has always been a challenge with Segment too, is that it's just an enterprise sale or a different buyer than kind of what that is. You know, Elena had been in there for a year to try to kind of change that sales approach from a... You just outlined all of the changes you're making from a product roadmap standpoint, but do you feel like you have the go-to-market ironed out for what needs to happen with Segment?
Yeah, I think so. I mean, just a very brief history lesson is we bought the team, we embedded them into our generalist motion. That did not work because they were two different buyers, fundamentally. In the process of doing so, we lost all of our sellers in Segment. We had to go and rebuild that team. Credit to Elena for going and doing that. That team is now in place. We feel great about the leadership that's there, too.
Mm-hmm.
And so now it's a story of execution, and I think that's a self-help story, one that I feel much more comfortable with winning.
Okay. And then on the communications side of the business, you know, you guys are able to get a premium in the market. I would think that that premium you can enhance kind of with Segment and Engage, but just what are some of the ways that you're enhancing the value proposition for just those core communications customers?
Yeah, I mean, the easiest answer is AI.
Mm.
I mean, I think that is, like, the immediate answer today, and we already have products that are in the marketplace that do that. So let me give you an example. So we have this product called Fraud Guard, okay? And the kind of more premium version of it is Verify. And that product basically prevents artificially inflated traffic from happening in a customer's workloads. And that product is so good that within one month, a customer will immediately see the payback.
Mm-hmm.
And actually, we do, at the end of every month, we send them an email that says, "This is what would have happened had our machine learning engine not been working in service of you, and instead, you saved all this money." And what it tends to be is, as I said a moment ago, a one-month payback. So that's a great example in terms of-
Yeah
... securing trust on the platform. Now, a different example is that on our voice product, we also have AI capabilities that basically keep track of the voice conversation in real time. And so imagine, like, you were to call into some sort of, like, service experience. You're on the phone, and it's doing the transcription in real time, it's picking out the keywords in real time, it's using emotive techniques to pick up whether or not you're, like, really angry at the other side, and it's able to escalate to the right workflow, it's able to figure out where to go next in the interaction, and that's sort of, like, the simplest version of the thing that we can do.
Yeah.
But I think, that's, again, it's a fielded product that's already out there in the marketplace. I think the third is that we're innovating on now, and we'll have some interesting things to share towards the end of the year and next year, is like, we're also very focused on omni-channel. Like, I think what a lot of people don't realize is that not per se in the content of voice calls or-
Yeah
... messages, which is not stuff that we can look at, but in the metadata of what happens in communications itself, right? So Meta, like, whatever the last interaction that you had is, what's the channel that you preferred? What's the time of day that it took place? Did something actually happen on the other side of it, or do you just look at it and, like, move on and-
Yeah
... because it's just like a blast promotion or something like that?
Yeah.
That data is actually quite valuable, and we can harvest that data to be able to, A, figure out exactly how to serve you, vis-a-vis, one of our customers, obviously-
Right
... at the right time, in the right way. And then what our omnichannel capacity allows for is, whatever the channel is globally in which you most want to be interacted with, that is, the most, both the highest efficacy for our customers, but also the most satisfying for you as a consumer-
Mm-hmm
... that can be unlocked as well, and that doesn't actually require Segment, any of that.
Right.
Now, Segment will be additive to all of that, right?
Yeah.
There are additional workloads that we're creating there, that are really cool, that will obviously incorporate AI, too, but I'm getting ahead of myself, so.
Okay. And so investors around this business, you know, we never, ever get away from a conversation around margins -
Yeah
... of this business. You know, and there's always kind of noise around lower-priced competitors. Just what do you think that investors are missing about kind of the profitability potential about this business?
Well, I think a couple things. One is, as you've rightly said-
Yeah
... there's always been noise about low-cost competitors.
Right.
Okay, so that's not what I worry about, you know-
Yeah
... when I wake up in the morning. We are the premium priced product in the marketplace. We understand that.
Mm-hmm.
And yet we continue to grow at the rates that we do, which surpass all of our competitors, certainly the public comps. And we are, if anything, a share taker, okay? And so that means that our technology is fundamentally better. If it wasn't, like, we wouldn't win in that way. And we believe that we deserve a price premium. We'll charge always a fair price to our customers-
Mm
... but it is a premium, and I think our technology, recognizes that. I think in terms of... What was the second part of your question?
What was the second part of my question? Just the profitability potential.
The profitability. Yeah, okay. So look, in one year, we took a business that was effectively losing a little bit of money, maybe just-
Mm-hmm
... a tad break even, and over that period of time, like, just fundamentally reshaped the operating expense profile of the business. We made it much more productive. We got it to, you know, significant non-GAAP margins over a very short period of time, and on the back of that, we're able to start generating a significant amount of free cash flow that obviously provides a tremendous amount of optionality, and in addition to that, have lowered our stock-based compensation, and we're able to offer a target for next year, which is a two-year pull forward on when we get to GAAP profitability, right? So-
Yeah.
those are all aspects of within the context of the margin framework that we have, that I think are real positives for the business, and I'm, I'm gonna get back to margins in one moment. But still within our operating expense profile, we still think there's opportunity there.
Yeah.
We think there's opportunity that we're working on, like, right now with automation. We think there's opportunity with respect to AI. We think there's opportunity with respect to the geographies in which we have our employees. We call it workforce planning. So there's a number of aspects of what we can fundamentally do better there, that I think on the one hand, allow us to free up capacity to reinvest in R&D, which is important, and on the other hand, allow us to drop more of that to the bottom line.
Even in the current year, you know, I know there's, like, a little bit of noise around, the guidance framework that we've given for the year, but that also includes, like, a charge that we're gonna be taking for a new bonus, that without which we would be driving additional leverage in the current year in a relatively lower growth environment. In terms of the gross margins, which I think is probably the thrust to your question-
Yeah.
I think that as you look at some of these more recent AI workloads, like I alluded to Fraud Guard and Verify a moment ago, like, those are software margins effectively.
Mm-hmm.
Right? So that allows us to offer a product capability that has better margins than sort of a standard SMS. I think omni-channel is another example where it has the opportunity to create higher margins than, you know, standard SMS or even standard voice, for that matter. And additional AI workloads that we've got sort of in the innovation roadmap will allow us to do the same.
Okay. And maybe just kind of last question on the messaging business. You know, you announced a nine-figure deal on the Q4 earnings... or a nine-figure commitment. Can you just say, like, do you see an opportunity to kind of consolidate, share, gain share within customers, or just where do you see that opportunity to kind of grab share within the market?
Yeah, I think the short answer is yes. I mean, I think the—that particular deal, and, you know, there have been a few others that we've mentioned that have been-
Mm-hmm
... sort of eight to nine figures as well, over the course of the last year or so, like relationships that we have with customers. What's important about those is that we've sort of put new life into our ISV approach to many of our partners. You know, these are partners that use significant Twilio workloads. Many of them actually use significant Segment workloads as well, which is also very attractive, and we're trying to serve them the best way that we can through a number of channels, so that they can then offer what they do on the other side of that. And so honestly, I think it's predominantly a renewed focus on our ISV channel-
Okay
... and credit to the leader of that part of the business and our sales team for, for driving that.
Okay. You know, another change that you've made over the last year is kind of tying compensation more to gross profit dollars versus just revenue. Can you just speak to kind of some of the cross-sell traction that you're seeing here and, you know, how you expect that to kind of increase, driven by some of those changes?
Yeah, I mean, to be honest, like, there's always kind of been this debate with investors about should we even track revenue? Should we just track gross profit growth? And like, you know, the reality is, like, we have a financial statement, we have to track both. I think as the... Having been the former CFO, I just think it's financially responsible to-
Mm-hmm
... compensate reps on gross profit, right? I mean, we, we have to bring gross profit into the business. We've long had this dialogue with investors that, we don't do things that don't make economic sense, and I think this is sort of the internal validation mechanism that that would never happen, because why would a rep work on something that doesn't create gross profit? Because they won't get paid, right?
Right.
So I think that aligns all of the incentives in a way that we hadn't had before, and so I do think it was helpful. And gross profit dollars obviously drive, revenue dollars, too. I think in terms of cross-sell, every one of our messaging deals has an incentive to be able to, just to stick with messaging for a second, upsell it to Verify. Okay, Verify has a 20-30-point margin advantage relative to traditional SMS, and so that's attractive. Reps are incentivized to do that, and we're seeing great growth in that kind of singular product.
Mm-hmm.
In addition to that, with respect to cross-sell, we also have a lot of opportunities based on what I said a second ago around voice and some of the things that we're doing with AI there. My personal view is, I think we'll see sort of a renaissance in voice, just given AI is, like, much more normal in a voice context. But, I think there's a huge opportunity, and we're starting to see green shoots of that, I would say, in terms of a traditional messaging or email customer now starting to incorporate voice, especially as they start to invest in AI. So I think that's quite attractive too.
Yeah.
And then finally, we still do have incentives to be able to pull through either the core communications or, or Segment into either or part of the business. Even though the buyers are a little bit different, the incentives are significant to be able to pull through that stuff.
Okay. And then maybe a second on the Flex product or kind of your CCaaS product. You know, that originally was part of the data and applications business. You moved that over to communications. That would seem to be more of a developer-led sale as a result of it. Can you just kind of give a state of play of how you see Flex? Where you see the best market opportunity for Flex and, just, you know, versus a lot of noise about contact center right now?
Yeah, I would sort of agree with your your statement, that I think it serves the developer audience quite well, and that was always what it was intended to be, is: here's a platform with a set of building blocks that allow you to build contact center capabilities, either to augment what you have already or on top of your existing kit. The reality is that we actually do have, like, many enterprises that are signed up for the product, and so we serve them, too. My view of it is that going forward, what's probably- so maybe just to-
Yeah
Back up a step. The reason that we brought it back to communications was, what we were immediately finding in the marketplace is that many customers were like, "Well, do I want a voice IVR solution, or do I actually want a full-fledged contact center solution?" And we'd have two sales teams go into a customer and say, "Well, you want this," and the other one would say, "You want this," and that's bad, right? Like, that's a bad experience for a customer and, you know, we look foolish when we do that. So we see the opportunity, I think, in Flex as being, we will do a full contact center installation.
That is, we're good at doing that, but you have to be ready for bringing your own in your own capabilities in terms of all of the bells and whistles that you might want on top of it. It's not fully featured. We've never said it was gonna be fully featured. That's kind of the nature of the product that we've built. However, it's also very attractive for folks that want composability.
Mm-hmm.
So if you want a voice IVR solution, we're gonna grab aspects of Flex to be able to aid that. If you want just our workflow engine, i.e., TaskRouter, we'll be able to sell that to you. If you want, like, a Studio environment in which you basically want a low-to-no-code type of kit, then we can do that for you as well. And so the idea really was not to deprioritize Flex, but instead to say, there's a full-fledged contact center on one end of the continuum, there's voice IVR on the other end of the continuum, and we're prepared to sell you either end and everything in the middle, and this allows us to do that.
Okay. You know, a common debate I have with investors is just how to think about what is the growth of messaging at this point. You know, obviously, pre-COVID, and even during COVID, you guys were in a kind of hyper-growth period. You've laid out targets now of kind of 5%-10% for this year for kind of the overall business. But just how do you see, you know, what is the growth opportunity, either in terms of, you know, is there... How are you measuring kind of what the growth of the market is in messaging?
Yeah. So I think with respect to COVID, I mean, obviously, there was, like, a significant acceleration during a very short period of time because everybody had to go digital immediately, right?
Right.
So understandably, and I think in the couple of years since, you've basically seen, like, a bit of a come down off of that. And I think we've kind of now entered a phase, especially post-crypto, if you will, where growth rates are a little bit more normalized. And so I think the question you're really asking is, like, what are the reaccelerators here that exist-
Right
... for additional growth down the line? So I think that, if it was just a core SMS business and a core voice, core email, like, the range that we provided for the year, which we do feel comfortable with, is probably, like, what it would be just if we were to stop there. Okay?
Okay.
Obviously, we don't intend to stop there. Like, the whole, the whole idea is to add innovation on top of that. I think some of these things that I, I mentioned a moment ago, Verify, Voice Intelligence, omni-channel capabilities, and over time, like, there's so many more things that we know that we can do for a customer using AI, using all of the data that I talked about, just in the context of communications, to be able to create interesting outcomes for customers. I think those are ultimately the growth drivers longer term.
Right.
Obviously, I'm not, like, sitting here guiding to that right now, but I do think there's a lot of opportunity in that regard, and we're really, really focused on those things in our innovation roadmap.
Okay. You alluded to it in an answer earlier, but, you know, partnerships have always been something that you guys have talked about, but probably underexploited. Just how are you looking at expanding these relationships, and where or what parts of the business can that be most impactful to?
Yeah, great question. I think, I think the first and most obvious place is with respect to ISVs. You know, so we have, and I, I don't know the number off the top of my head, but, like, you know, just dozens and dozens of relationships with, like, material ISVs, right? Who drive really significant volumes through our platform, and then several hundred, you know, with folks that are just getting started, a little bit smaller, and we think that's a really attractive growth vehicle, you know, for, for the company. These are folks that have kind of distribution advantages, that we're able to leverage their distribution, if you will, because of the number of customers they serve. And so I think that's probably the first area that we would think about as it relates to partners.
I think the second is then, you know, how do we use, whether it's, like, for example, with, with respect to Segment and, and Twilio, for that matter, if we were to use, like, some of the data warehouse providers, you know-
Mm-hmm
... just as an example. Clearly, the warehouse is a spot in which a tremendous amount of data is processed. We happen to generate a lot of the data that ends up there, and so we've announced a number of partnerships with those folks as well, which is why I used that example, and I think that's another really interesting way. We don't compete with any of those guys. In fact, our offerings are totally complementary, and so there, again, I think we have an opportunity where they go to market with their advantages, we go to market with our advantages. It's mutually beneficial to both sides, and so I see that as being really attractive as well. And then I think internationally-...
You know, the reality is, we've kind of rationalized our sales footprint over the course of the last year. It's not like we're planning to add back hundreds of resources internationally. You know, we announced this relationship that we did recently with SoftBank, which is, like, not quite an ISV, it's a little bit different than that. I think scaled players like a SoftBank that have distribution advantages, I think are really interesting for us because they allow us to reach into a geography and cover a lot more ground without having the boots on the ground.
Okay. Okay. I wanna open it up to questions, if there are any, before I dig in. All right, everybody is good. Maybe on the profitability side of the business, getting your CFO hat back on, you know, you've meaningfully improved kind of the operating profile of the business. Just as you think about where there needs to be kind of reinvestment and where there can be kind of further amounts or further leverage within the business, just how are you thinking about kind of the offsets of that?
Well, I never took the hat off-
Yeah.
So I just... I added a hat. So I mean, look, and I, I think that, I mean, jokes aside, like, that, that's part of the point, right? Is-
Yeah.
I think, again, what I want you to take away is that in the last eight weeks, it's been a sea change in the way that we're running this company.
Mm-hmm.
Like, we're running it with focus, rigor, and discipline. Now, with respect to your question, I think that the reinvestment areas have to be in R&D, right? I mean, ultimately, the story of technology and for Twilio is, what are the smart investments that we make that have, you know, outsized payoffs over time? I think that those are areas in which we, you know, historically, have probably gone big first-
Yeah
... without necessarily understanding the entirety of, like, what the product market fit is there. I see a lot of, like, really interesting green shoot opportunities. I'm not ready to, like, declare that-
Yeah
... that's the one, and so that's, you know, therefore, the future of the company. But I see a lot of those that I think are really interesting, and I think the key for us is placing a number of small bets all at the same time. Once we start to see a little bit of traction with a customer, we invest a little bit more, and then once there genuinely is product market fit, then we put our distribution muscle behind it.
Right.
But I think, I think that, to state the obvious, like, AI is going to be one area in which we definitely put additional investment. It's not gonna be sort of blue-sky AI. It'll be probably small-language model-oriented-
Mm-hmm
... focus. It'll be adjacent technology to our existing offering. It'll be in service of augmenting, in particular, our communications and Segment offerings, right? And I think voice, as I said earlier, is a really interesting place to start, just because it's so natural in terms of the way that we interact with one another. And I think that is principally the area of focus that we should be reinvesting in. I'd say probably the other one that you astutely asked a moment ago is, I think inside of our distribution, investing in partnerships is also wise because it allows us to get leverage distribution-
Mm-hmm
... without having to invest in, you know, reps at sort of a linear rate.
Yeah.
You know, we'll continue investing in reps, so I don't want you to take that away, but I think, having partners in the mix, reinvesting in, enabling them to serve us well and to allow our products to get in the field is important.
So, as with the strategic review completion, you announced a $2 billion share repurchase. That's on top of kind of the remaining $200 million of authorization that you guys still had. Just as you think about capital allocation, as you think about share repurchase, just why was that the right amount? How are you thinking about kind of uses of, of cash going forward and, and maybe M&A as a part of that, if that is a part of any equation?
We have no plans to do any large-scale M&A.
Okay.
So let me just take that off the table.
Yeah.
I think, look, we wanna maintain some optionality, okay? So I think for us, like, $2 billion is a really significant move in a very short period of time. We said we'd get it done by the end of the year. I think we have a good track record now on the back of the original, the 200-
Yeah
... million that's left is on top of an original $1 billion commitment that we've made, and so we feel really good about that. We happen to have $1 billion of debt on the balance sheet, and so we wanna maintain a little bit of cover there, but we thought it was the right number at the right time. It's a big move for us. It absolutely helps with dilution, and so that's also an area that we're kind of focused on. We'll maintain flexibility over time, but I think we do see an opportunity to kind of do meaningful capital allocation in that way, and I wouldn't imagine that we would do any large scale M&A.
Okay. Just because there's been various turnover in various positions, are there any major kind of outstanding positions at this point that you're kind of looking to hire for?
Yeah, I mean, we're always, like, in the market, right?
Yeah.
I think that we just announced Thomas, obviously.
Right.
Like, all of the other areas that we had, let's say, blanks in, like, we've filled those roles. I don't wanna get ahead of those.
Yeah
... what those announcements might be. But we feel really, really good about the team. I think it's a, it's a true partnership, and I think all of the key positions are currently filled.
All right. Well, perfect. Khozema, thanks so much for being here.
Yeah, thank you for having me.
Congrats on the new role.
Okay, thanks.