Okay, good morning, everyone. I'm Mark Murphy, Software Analyst from JP Morgan. Great to see everyone, and it is a real pleasure to be here with Khozema Shipchandler, who is the CEO of Twilio. So, first off, Khozema, I want to thank you for taking the time, making the trip out here, and welcome to the conference.
Thanks a lot, Mark. It's my pleasure.
I want to also congratulate you on your new role this year, and hoping we could kind of kick off here by having you give us just a brief introduction of the company for the benefit of anyone in the audience who's not familiar yet.
Yeah, again, thank you. It's been a super exciting time, super exciting time for the company. Twilio, at its core, is a customer engagement platform. We enable that through core communications technology, a data platform, and increasingly AI, which I'm sure we'll talk about during the course of the conversation. But ultimately, our job is to make sure that we deliver really important workloads from our customers to consumers like you and I, using communications as a vehicle to do that.
So, there has been an ongoing evolution at Twilio. You know, there's been, frankly, a lot of change the last couple of years across the industry and in the company, right? You've had changes that flow across the product. It's across the leadership, the go-to-market, the headcount, and I think importantly, the profitability structure of the company. How do you think that those changes might reinvigorate and perhaps set the business up for success if we're looking forward a couple, few years down the road?
Yeah, it's a great question, Mark. I think from a change perspective, I'd maybe kind of call out three, and I think these are what lead to the setup in terms of the medium to long-term picture. I think first, you know, we went down the path of creating business units for the company. I think that's led to much better focus in terms of the way that we're allocating capital, the way that we're allocating our resources, and it's also allowed us to serve customers better, because the go-to-market motions from the businesses are just kind of fundamentally different, and so that really helps.
I think the second thing is that while some of the management team is the same, some of it's different, which we'll talk about in a moment. We're running the company totally differently than we were just six months ago, even. And what I mean by that is, we're running it with a lot more rigor, discipline, focus, and I think that's leading to some of the financial outcomes that you're seeing, especially around profitability and cash flow. And this team is very, very serious about making sure that we meet those financial commitments. And then I think the third thing is that we've also been fortunate to be able to bring in some new blood, too.
So, for example, you know, we brought in, Thomas Wyatt, who's leading our Segment business, Inbal Shani, who leads, R&D for our Communications business, and then most recently, Chris Koehler, who leads our marketing function. And I think the combination of some of the existing players, as well as the new blood, and in addition to some of the free cash flow generation, allows us to start thinking about a new investment cycle, one that's done with a lot more focus than I would suggest it was done previously. But that's kind of the setup that it's gonna lead ultimately to medium to long-term growth.
The cash flow has been a good support for the buyback activity as well, using the balance sheet and the cash flow. We went back and looked at this. You've bought back stock five quarters in a row. I believe you're trying to exhaust the $3 billion authorization by the end of the year, right? So it's a pretty substantial reduction of the share count. Why is Twilio buying back so much stock? I think, especially at a time when, you know, the cash earns a good return, just sitting there on the balance sheet. I think, from an external viewpoint, presumably, you see some disconnects, right?
Where the market might be kind of underappreciating where Twilio could be, you know, kind of doing the buyback. Can you walk us through the mindset on this, and what do you think some of the disconnects might be?
Yeah, I mean, I'd say fundamentally, the reason that we're doing the buyback is because we believe that the stock is undervalued, and so this is a really smart and opportunistic time from our perspective. You pointed to some of the cash that we have on the balance sheet. I think given the fact that we're in a free cash flow position, we're not really a significant participant from an M&A perspective. I think that gives us significant optionality to be able to buy back as much stock as we have. You're right on the numbers. You know, we'd previously authorized about $1 billion, now $2 billion. We're aiming to complete the whole thing by the end of the year, and I think that positions us really well.
In addition to that, we're starting to generate our own free cash flow, as we talked about. I think that also leads to kind of further optionality. You know, we could buy back more shares at some point down the road. We could potentially look at M&A if something became attractive. But I think sitting here right now, the bottom line is that we do think the company is undervalued. We do think we've got a lot of optionality, and so being in a position like this is really fortunate, and we'll see how things shake out, you know, after the end of the year.
So, Khozema, let's look at the communication side of the business. About 93% of revenue, you know, you're, you're approaching this $4 billion run rate on that side of the business. And, you know, thinking back to the time of the IPO, Twilio, you know, very clearly has been a leader, in this market, you know, probably close to a decade ago, really defined how this, redefined how the market works. What inning do you think, we're in, you know, at this point, if we just were to look at SMS text messaging? Because I think on the upside, we look at it, and we say, "this is a market that has ubiquity." You have the high open rates, you have reliability. There are also alternatives, right?
People will bring up push notifications. They will bring up other messaging constructs, like WhatsApp and Facebook Messenger. How do you think through this market and try to understand whether there's, you know, a little bit of maturation going on, or whether there's still a lot of runway left?
... I mean, I think it's mostly tailwind, and I'll describe it this way. I think, first of all, we're fortunate in that we serve all of the different channels that you just mentioned, okay? So whether or not communications end up transiting, you know, through OTT, through SMS, whether I personally, I think there's, like, sort of a renaissance that's happening in voice right now, especially with AI workloads, and it's just, like, so much more natural to talk like you and I are, versus doing it necessarily through some of the other channels. So I think that's gonna be kind of an accelerant, too. But I think all of those channels ultimately value ends up accruing to Twilio because we support all of them. I think each of them ends up serving different kinds of workloads.
I think, you know, let's use Push as an example or, or kind of in-app messages. Like, the reality is, is that for something like that, most of us have tolerance for a certain amount of real estate on our phones, for example.
Mm-hmm.
And so we're only gonna take so many of those things, and which is what makes SMS so attractive. It's the universal standard. It's hard for me to imagine sitting here today that something supplants it. You know, I'm not a huge baseball fan. I realize that's probably sacrilege in this city, but, well, it's also the NBA playoffs, I guess. So let's say, like, it's probably the second period, you know, in terms of, where we are with respect to that. But I think there's a lot more that's gonna happen here, and, we're seeing, you know, stabilization in volumes right now. But I think especially based on AI and what we're able to do there, we do think there's an opportunity for some additional tailwind as, as things go.
Okay, so second period of the basketball game for SMS texts - but you're hopeful or optimistic on some tailwinds?
I'm kind of both. I mean, I think, you know, we've given guidance that we're not gonna veer from, right? So we feel good about the kind of guidance framework that we've got. We haven't put it out there, you know, for longer than the period that we've given. I think medium to long term, we feel quite optimistic about the direction of the business. I think whether that ends up accruing exactly to SMS or through some other kind of communications channel, I mentioned voice, I think, is gonna see a renaissance over a period of time. I think that remains to be seen, but generally speaking, I'm extremely optimistic about the prospects of the business.
Okay. We may need to take another look at what's happening on the voice side of the business, and I appreciate you mentioning that. So Khozema, I'm thinking back to one year ago. It was on this stage that, you know, Twilio had mentioned kind of starting to see a stabilization of usage volumes across the communications business, so that would have been Q2 of 2023. And, you know, people in the audience certainly noticed that, right, at that time. Thinking back, you had your recent earnings call about two weeks ago, and there was a comment that the messaging volumes continued to stabilize, but they weren't. There was a comment that they're not exactly inflecting upwards.
And you know, you said, also said on the earnings call, "We're focused on growth levers we believe will drive re-acceleration both, in both the short term and the long term." So, I think we're curious what it is that you're alluding to, and do you see some kind of uplift potentially coming in the, that organic communications growth rate, you know, at some point above? Because that level was reasonably good. It was seven percent level there in Q1.
Yeah, so a lot there. So let me just kind of unpack it one at a time. I think, Mark, in terms of the stabilization, like we continue to see stabilization in volumes, but as we noted during the time of the call, what we've not yet seen is that inflection up. And so I still think we're kind of in that zone, and we're optimistic about that potentially transpiring. I'll talk about that through some of the efforts that we're undertaking ourselves to drive our own growth. But I think in general, we see a stable picture. We don't see sort of an inflective picture-
Mm
... if that makes sense. I think in terms of some of our own initiatives, you know, in particular, the ones that we're really focused on are cross-selling our products, you know, in different parts of the business. Once we have a landed customer, it's obviously a lot easier to be able to continue growing with that customer through other different products and services, and I think we've seen examples of that. You know, in particular, we've seen good examples with Fraud Guard and, and Verify Fraud Guard, for example. We've seen it with Voice Intelligence. I'm sure we'll talk about that later. But I think those are good examples where they represent upsells. Ultimately, they represent higher prices, better margins, and so, you know, we like the characteristics that cross-sell ends up driving.
I think, too, you know, we've started to do our own work with respect to Segment and the communications business, bringing those two capabilities together. I think that'll drive its own kind of cross-sell. You know, there's a specific product that we launched around that. And then finally, I think the other area where we're seeing a lot of traction is with respect to ISVs. So ISV volumes have been very, very strong. I think ISVs, in particular, allow us to reach a much broader set of customers and then ultimately consumers, and so that growth has been pretty exciting as well. I'd say all of those are things that we're kind of doing in the short term. I think in the medium term, ultimately, it's gonna be, I'd say, predominantly, if not all, organic. Like, we're not really planning for any inorganic activity right now. So-
Mm-hmm
... the organic activities would be predominantly behind investments that we're making today, that we're self-funding as a result of our own profitability and cash flow, that I'd suggest probably start to show up, you know, next year, late next year, in subsequent years, et cetera.
I wanna, I wanna come back to the Fraud Guard product in a couple of minutes, and I-
Sure
... and also some of those ISV wins that you'd announced. Before we do that, can you comment a bit on the A2P and traffic registrations? Are we at a point where that is no longer a topic? Have we... Are we through? Because that had constrained some of the volumes for a period of time. I think actually that was an aspect where the headwind was not as severe as you had maybe thought it would be in the middle of last year. Are we through that?
Yeah, the short answer is yes, and it, it didn't really have a significant impact at all on our business.
How about the impact of this movement over to the self-serve motion? Are we at a point where you feel like that is something that is kicking in in terms of the comms business, where you can? I think the main part of the thrust there was to try to onboard more business with less of a human touch. I don't know if some of that related to the support organization as well.
Yeah, that's an astute question. So I think, maybe just to kind of go back in time for a moment. So when we were kind of maybe a little bit over a year ago last year, you know, that was sort of on the back of a couple layoffs that we'd undertaken. And at that time, what we'd felt, and I think we're now starting to see it bear out, is that we could be a lot more effective about reaching our customers. And so part of the layoffs were aimed at being more efficient, our go-to-market motion, and transitioning a lot more of that workload over towards self-serve. And in the most recent quarter, I think what you've seen is a pretty significant increase in our overall customer count. A lot of that ends up coming through self-serve.
Mm-hmm.
The reason that's so exciting is that, you know, some of today's best-known brands, especially among the digital natives, they started as self-serve customers without us even knowing that they were gonna end up being, you know, some of the world's largest brands. And so that's been great. I think our efforts, in particular, were really aimed at cleaning up a lot of the, you know, kind of keeping the lights on style work, compliance work in particular, that needed to be done so that the friction for a self-serve customer was taken out of the process, that A2P introduced a lot of that, and I think we're past that now. So I feel quite good about where self-serve is. I think it's always been an important growth vector for the company.
You know, it's a fast-growing part of the business, and I'm really excited about it going forward.
Khozema, how are you reading the tea leaves on the macro demand environment? Because I think, I think what you said, going back to what you said again a moment ago, it is, there's some stabilization. There's nothing really kind of conveying a V-shaped recovery. I think that's certainly the sense we get from talking to other companies here. But, you know, I'm wondering what your sense is of how it could trend going forward the next several quarters. I try to think from, you know, the seat that you sit in, are there kind of metrics on your dashboard that you can watch? Are you trying to watch the messaging volumes in real time?
Is that your best read, or is there, is there a way you could hone in on something specific, like looking at what's maybe. You know, the sense around—the sense in recent weeks and months is that it's the small business that's struggling more. The small business is struggling with the weight of, you know, higher interest rates. Do you have any way of teasing it out in your data or anything in particular that you look at?
Yeah, I wouldn't characterize our business exactly in the way that you said, Mark. So I, I wouldn't necessarily say that we're seeing a read-through based on the volumes in our business, where I would specifically point to, like, an SMB-style impact.
Mm-hmm.
In fact, if anything, I think just given what we talked about a moment ago around self-serve, like, a lot of those businesses tend to be fundamentally SMBs, even if they're digital natives, and so I think that volume's been actually pretty good. I think generally speaking, we're seeing most industries have been generally pretty solid. Like, again, no one's inflecting, I think, in a necessarily, like, really standout way. But I think as I look at, like, the demand signals in the business, and I think what you're really getting at is, like, our business is sort of a leading indicator in terms of a lot of industries. We are seeing strength in a variety of pockets. We're seeing it honestly in most industries. There's one exception to that, which is kind of international termination.
But broadly speaking, we see a pretty good environment. We're not planning for, in our own FP&A planning, like, a macro recovery of some sort. It kind of seems like it's gonna play through. I'm not an economist, so I'm not really gonna take a view on that one way or the other. We're not planning for a lower interest rate environment. Like, that's not what's, like, really informing our models. I think if it happens, it probably provides tailwind, but that's not really how we're planning for our business. I think based on the demand signals that we see, based on the, the workloads that we end up carrying, it's been generally pretty solid.
Are you able to get a read on how your larger customers are thinking about their marketing budgets? Because we have been through this period where, you know, when you get into an economic slowdown, right, they tend to pull back a little, you know, to some extent on the marketing side of it. I'm wondering if you ever- if you're able to get a read on that, or even just looking at retail, e-commerce related, you know, messaging volumes. I don't know if you're able to, you know, see what is in order confirmation or, like, anything that would kind of inform a view of the health of the consumer.
Yeah, there's maybe two different dynamics there, actually, Mark.
Yeah.
I think, maybe just one thing to be clear, like, we definitely do not look at the content of our messages. So, like, that would, like, sort of violate our-
Mm
... our own use policy with customers. But in terms of the industries and then the workloads, obviously, we know kind of the messages. I'd say retail has actually been pretty strong, retail and e-commerce. Like, it's not been crazy strong, but I think generally speaking, I think from our perspective, the read-through is that consumer spending, as it relates to retail e-commerce, has been pretty decent. Obviously, I understand that based on the number of companies that have reported and their results, there seems to be kind of like a mixed, maybe even soft picture out there. But I think in our own business, the volumes and workloads that we've been carrying, it would suggest that retail e-commerce has been okay.
Okay. How do you think about staffing the business appropriately, you know, kind of for the environment that we're in? Because we do keep harping on this, it's been across the software industry, the hiring has been very sluggish. And then when, you know, we look at Twilio, your headcount compressed, I think for the sixth consecutive quarter. You know, you are one of the businesses that adjusted very, and tried to rightsize, you know, very rapidly. But is there anything that would inform your view that it is the right time to kind of lean in again on hiring?
Or, do you, do you think we look at something structurally where you, because of the nature of the business, you could see a re-acceleration, when it comes around, without really having to incrementally ramp hiring?
I don't think those two things are necessarily connected. So I think if you're suggesting, "is there revenue growth, potentially re-acceleration or what have you, tied to headcount growth," I would say not for our business necessarily.
Yeah.
I think our staffing levels are quite appropriate. I have no regrets whatsoever about the actions that we undertook over the course of the last year or so. I don't think it's really impacted growth in any significant way. On the contrary, I think it's led to much better process and communication and efficiency inside of the company. I think it's de-layered. I think that makes things just kind of simpler. It takes friction out of the system. And I think the way that we're planning today is that we don't necessarily need any additional headcount to be able to drive additional growth.
I think one other thing that I would just add to that, Mark, is that, especially now, given some of the advent of, like, what AI is doing for a lot of companies in terms of their external workloads, and us too, I mean, the same things are starting to apply internally as well. And so I think if anything, we see opportunity as it relates to AI, to automation, and I think that actually helps us with operating leverage over time, in addition to kind of the natural lift that we'll get from volume leverage.
Okay. Okay, so in other words, yes, the top-line growth can be pretty decoupled from the headcount and staffing level. So what about-
Yes.
As we think, Khozema, in terms of how it would might translate into free cash flow, this is one. You know, heading into Q1, we had shared our view that the free cash flow generation over time could be, you know, quite a bit higher than investors might expect. You know, coming off of that quarter, you guided free cash flow 35% above consensus. I don't think we're going to see that too often. So it, it's trending towards $4 a share for this year, would've been around $2 a share last year. Do you have any perspective on, you know, how to trend it beyond that? In other words, you know, so we've had, we've had the big surge.
Is there some ongoing margin expansion, you know, while you've got a buyback, you know, happening there in the background, right? That to me is a potential equation on, you know, being pretty supportive of free cash flow per share.
Yeah, I mean, so again, there's a lot there, Mark. I think the free cash flow generation, put simply, is, like, really on the back of our operating profit, right? I mean, I think the business has started to deliver really significant profitability. I think that, you know, in the first half, especially of last year, we were undertaking restructuring, right? And so that has sort of a cash outflow impact. I think as you normalize out of those different things, you know, your cash flow tends to kind of track operating profit. We're not, like, a significant working capital user. It's not like we have, like, significant CapEx in our business. And so, by and large, you know, we feel pretty good about free cash flow's ability to kind of track where we are from an operating profit perspective.
You know, what we'd said as a part of our guidance is that we expect free cash flow to be in line with, with our operating profit and operating leverage. I think that over time, I would anticipate that as we deliver additional operating leverage, you should expect kind of the same thing from a free cash flow perspective, given what I said about the, the balance sheet characteristics of the company. I think that the buyback and, and the free cash flow, I mean, they're coincidental, I would say for the most part. I mean, it's not like we did the buyback because we necessarily saw so much free cash flow or, or necessarily saw, urgency about generating so much free cash flow because of the buyback. I think that they're, they're coincidental events.
We feel really good about the ability to do both at the same time. Obviously, doing that significant of a buyback and taking down the share count while also generating this much cash, gives us a lot of optionality, right? And so I think that could allow for additional buyback down the line. That could allow for M&A if we felt like there was a good fit. The bottom line is there's optionality there, and we're really proud of what we've been able to accomplish in a relatively short period of time, to be frank.
Optionality is a good thing. So Khozema, I want to ask you just for a moment on product strategy and one of the directions that I think you've been laying out with us, which is, we think of as cross-pollination of Segment, Segment or AI into the, into the comms platform, right?
Yeah.
And so I think we've always appreciated that there should be some potential that you would take a CDP-like Segment, and you can then take customer data, you can plug that into an LLM or some type of an AI model, right? And then you're taking action via the comms platform. So we've always appreciated there's some kind of potential there. And going back to the recent earnings call again, you talked about Unified Profiles. You also talked about Agent Copilot. There's a lot going on with that. And I think you're saying in beta testing, you're deflecting 70% of support cases with some of these products.
Can you make the concept there a little more tangible, for us, maybe, just in terms of what's the pain point that you're trying to address here?
Yeah, definitely. So, Look, first of all, the, I think this really kind of goes to, like, discipline, focus, and rigor. Like, we'd long said that these two product capabilities are better together, and we hadn't delivered against that, right? So shame on us. Now we're very, very, like, deadly set on ensuring that we deliver three products this year, where Segment is natively embedded inside of our communications capabilities. The first one being what you referred to, which is Agent Copilot.
Right.
Now, in terms of what it does, okay, so the Unified Profile is basically a data view, contextual data view of your customer, and the Agent Copilot is AI leveraging our contact center capabilities, where we're able to determine, during the actual context of a conversation, using information that we know about the individual that's calling in, how exactly to solve that workload faster. And in the example that you cited, it was actually done with an online university based out of Mexico. They were running extraordinarily high CSAT rates, kind of mid-90s. They asked us to experiment with this with them. They wanted to reduce their costs. Their costs came down 30%. The deflection statistic that you pointed to was 70% in terms of call deflection to some other kind of form of self-serve or whatnot.
In the process of doing so, CSAT stayed exactly where it was, right? So that's kind of like the promise of AI, right? Like, it's a-
Mm-hmm
... fundamentally same or better experience at a lower cost point. And I think that what we were—the Unified Profile you're gonna see increasingly emerge in all of the capabilities that we end up delivering at Twilio that have Segment natively embedded, and then these different copilots, whether we call them that or not, in all cases, I don't know, but in this example, it's able to take that workload and accelerate what would've already otherwise happened.
Okay.
Really, pretty cool, actually.
Do you feel like it's something that's pretty packageable and replicable?
Yeah, I mean, I definitely do. I mean, I think that we've done our own experimentation with a lot of customers, and fundamentally, when a customer sees what's possible, I mean, you know, their eyes light up, right? Like, everybody runs, like, a customer service center or a contact center or a call center, whatever the case may be, and you're looking at these examples, and the takeaway from a customer's perspective always is, "Wow, I'm at least getting the same thing, and I'm getting it for a lot cheaper.
Mm-hmm.
I think that's really, really compelling for customers, especially if we are in a constrained macro environment.
So, I think in and around that discussion, Twilio Voice Intelligence is something else that came up, right? It's handling sentiment analysis, it's doing call summarization, and along the lines of this product, you mentioned hundreds of customers are in the beta test. What are you seeing there? Is that something that's gonna be pretty monetizable?
Yeah, very monetizable. Again, it, it's an upsell, relative to what we would otherwise ordinarily do in Voice, which is already a pretty attractive product. You know, as I mentioned earlier, like, in the same way that you and I are talking right now, it's just, like, a much more natural way to interact. Like, imagine if this was just entirely happening through text, right? Like, that would be kinda difficult, and you wouldn't get any sense of, like, sentiment. You wouldn't get any sense of, like, emotion-
Yeah
... and stuff like that, right? And so in Voice, what's interesting about the Voice Intelligence product is, if a call's going totally haywire, like, the AI can automatically detect that and auto-escalate it, right, to a different person. If there are keywords that are super essential to, let's say, a retail transaction, right, like, all of that information can be harvested, it can be stored, and so that when the next interaction takes place between a consumer and one of our customers, we can make it better. And we can actually make it feel like you've been a customer of that business previously and that they know a little bit about you. And these were all, like, sort of dreams before in some respects, like, they're now all possible.
Ironically, like, if you just kinda analyze it through the lens of, like, your own life or my own life, these experiences are extraordinarily rare. Like, we just, like, don't get them that much, right?
Mm-hmm.
And so we see the promise being really, really significant because each of us as consumers wants this so badly.
Another one, Khozema, I think you had brought this up in the first couple minutes, is Verify Fraud Guard. I mean, another example of kind of embedding AI into another product. In this case, that's the verification product. And we went in and looked at this. It looks like it's trying to identify unusual behaviors. Maybe someone's creating multiple accounts using the same phone number. Maybe there's something else going on. How do you think about monetizing and packaging that one up? Is it gonna be something where, you know, someone today is using your basic multi-factor authentication, right? Your basic, you know, or even voice authentication, and then you're gonna have an upsell off of that?
Yeah. It's predominantly related to what happens around SMS. I mean, you could do it for voice too, but it's predominantly geared towards SMS. So just to back up a step, like, there is a lot of fraud, actually, that takes place vis-a-vis SMS, and we strongly recommend each, every single one of our customers that, at a minimum, they take kind of the free version of Fraud Guard that we offer them. And if they take the paid version, we actually guarantee it 100%. And as it relates to Verify, it's an incredibly fast-growing product. It is an upsell, and the reason it's so attractive to a customer is it pays back in as fast as 30 days, right?
So the ROI is, like, pretty incredible, and oh, by the way, like, we actually send every one of our paying customers an email every single month that shows them exactly how much fraud was stopped, how much money that they saved as a result, and that makes it a very sticky product as well. And I think just more broadly, like, we all want, like, trust in the ecosystem. Like, these channels are more valuable as long as they're protected, and products like Verify Fraud Guard allow for that.
Where do you stand, Khozema, on the Flex contact center business? Because I was thinking back on this one, it had been landing some sizable wins, I think maybe 9-12 months ago. I know you can't mention every product in every single earnings call, and maybe it's just a function of that. But there was mention of a company had rolled out Flex to over 15,000 agents, right? So that's a very, very large contact center. You know, I think in my mind, it maybe felt a little quieter lately. Maybe you've just been emphasizing some of the newer, more and more AI-oriented products, but any perspective on the demand and adoption out there for Flex?
I think it's largely a product of what you just said, Mark.
Yeah.
Like, you know, we don't try to turn every earnings call necessarily into, like, a greatest hits. But I, I think. There's two things, though, too. One is, we also took the Flex product and put it inside of communications, right?
Right. Mm-hmm.
So previously, it had been part of this Data and Applications business. We thought that moving it back into communications was a better move, the reason being that what we were finding was, inside of the company, there was channel conflict. That's usually a bad setup for a customer. And so now, a customer can buy kind of the entirety of the voice stack, whether that's just purely IVR workloads, it could be our TaskRouter capability, which is a separate SKU, it could be our Studio capabilities, it could be a full-fledged contact center. So that continuum is now what we offer. So that, that's kinda one part of it. I think the other part of it is that... It's kinda the conversation that we had a moment ago, with respect to Copilot. So we have introduced this Copilot.
I think what that's gonna accelerate over time, because I do think it's gonna take some time, is that there's, like, a real transition that's happening inside contact centers right now, right? Where AI can do some really, really interesting things, certainly initially in terms of better informing the context of a call, better deflection. But I think over time, ultimately, what probably starts happening is, is that there's a reduction in agents, and those values start to accrue to AI and stuff like that.
Okay.
We're not close to that yet, but I do think that'll happen.
Well, I don't wanna... I may come back to that in a moment, but-
Sure
... We have about 2 minutes left. I wanna just check and see if we have questions from the audience. If you do, go ahead and raise a hand, and we will run a microphone out to you. Okay, then, Khozema, let's wrap on exactly that. Let's wrap on the topic of AI and seat compression. If I put it to you this way: think about the imprint of gen AI technologies on the contact center landscape. Project this forward the next several years, because, as you've said, you these technologies are making a big impact, right? As you outlined with the university in Mexico.
Do you subscribe to a view that the LLM has become more powerful, they're gonna deflect more calls, they'll answer more questions, and that, you know, eventually, do you, do you start automating away some of the human personnel in the contact center?
I think eventually, that's inevitable, yes. I don't think it's tomorrow. I think... Look, the LLMs are already becoming, like, way more powerful. I'll just maybe add in one thing, which is, they require context, right? So a contact center experience is pretty lousy if all that's actually happening is that they're sending you and I to self-serve, right? Like, we're still frustrated at that point, right?
Right. Mm-hmm.
Nothing's really changed. We've just gone to a different place. I think what's important is you need rich context, which is really where our Segment and our Unified Profile comes into play. I think that you want the AI ultimately to solve the customer's problem, and so I think even if there's a reduction in seat count, the value that you were previously generating, let's say, from a license-based seat arrangement, probably transitions now to a solved problem, AI-oriented workload.
Mm-hmm. Mm-hmm.
But I think the other reality is, look, I mean, a lot of the industries that we serve, like, let's just take financial services or healthcare, right? I mean, you operate in a financial services industry. Like, it's very regulated, right? And so it's not like they're gonna flip over to AI immediately, and I just think that that process is gonna take some time. It's different in perhaps a university environment. It's definitely different if you're ordering a pizza. I think if you need a financial service or healthcare outcome, man, it better work. It cannot hallucinate... and you've gotta ensure that the safeguards are in place.
We can't be getting incorrect, medical advice-
Exactly
... from an LLM.
Exactly.
All right, on that note, Khozema, I can't thank you enough.
Great, thank you.
Wonderful to have you here at the conference.
Yeah, good seeing you, Mark.