Twilio Inc. Q2 FY2025 earnings call

• Twilio had a strong Q2 with over $1.2 billion in revenue, double-digit revenue growth, and another record quarter of non-GAAP income from operations and free cash flow.
• Segment business delivered non-GAAP income from operations for the first time, surpassing the breakeven target.
• Achieved fourth consecutive quarter of accelerating messaging growth and double-digit voice growth.
• Notable wins included Centerfield, Henry Schein One, etc. Dollar-based net expansion rate was 108% in Q2.
• Showcased new products at SIGNAL, like ConversationRelay, conversational intelligence for messaging, WhatsApp Business calling via programmable voice, RCS adoption, and Event triggered Journeys at Twilio Segment.
• Announced multiyear strategic partnership with Microsoft.
• Recognized as a leader in CPaaS Magic Quadrant by Gartner.

In Q2, Twilio's Communications business generated revenue of $1.153 billion, up 14% year-over-year. Segment revenue was $75 million, flat year-over-year. Non-GAAP income from operations for Communications was $281 million, and for Segment was $6 million, which exceeded the breakeven target. Communications revenue contributed significantly to the overall revenue, with messaging revenue mix increasing by 260 basis points year-over-year.

• Q3 revenue target: $1.245 billion to $1.255 billion, representing 8% to 9% organic growth and 10% to 11% reported growth.
• Raised full-year 2025 organic revenue growth guidance to 9% to 10%, and reported revenue growth to 10% to 11%.
• Non-GAAP income from operations guidance: $850 million to $875 million.
• Raised full-year free cash flow guidance to $875 million to $900 million.

• Regulatory changes could potentially impact the business.
• Carrier fees, such as the $6 million incremental pass-through from Verizon's A2P messaging fee increase, can affect gross margins.
• Gross margin fluctuations due to mix changes (e.g., messaging revenue mix increase) and foreign exchange (FX) effects.

Q: Can you speak to the traction of where you're seeing the most traction with ISVs?

A: Thomas Wyatt said ISV growth is strong across verticals, starting with messaging and adding other channels, with conversational insights providing a true representation of consumer engagement with brands.

Q: Is there any impact from the price increase in the quarter?

A: Aidan Viggiano said not material.

Q: Why now for a price increase on messaging in the U.S.?

A: Aidan Viggiano clarified it was separate from Verizon's A2P fee increase, and Thomas Wyatt said it reflects pricing power in self-service and helps enterprise deals over time.

Q: How are you thinking about the balance of market share growth for messaging and international markets relative to pricing?

A: Aidan Viggiano discussed gross margin impact from messaging mix and Thomas Wyatt talked about international go-to-market and cross-sell of products.