Sentiment Analysis of the earnings transcript to help figure out if there are any bullish or bearish sentiments that could be gathered from it. We're doing ML and AI based analysis on the earnings call to get some more insights.
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| Statement |
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| We saw a modest improvement in Q3 on bookings, on things like sales productivity, but they were relatively modest, and we're shooting for much better than modest in this business |
| We're excited about the excitement that we've seen but more to come over time on how it all plays out through the financials |
| Despite the fact that the unit economics for both are very strong and actually the unit economics of an international message are slightly better than the unit economics of the U.S |
| So I would say those things, I think the other things like cross-selling into kind of higher margin, higher gross profit dollar type products will also drive improved OM expansion as well |
| And it's been really exciting to talk to customers about our product and kind of feature road map |
| And then on operating income margins, you've seen incredible improvement this year |
| And what I would say is that I would expect the trend -- those two things correlate, right? Like as you reduce the cost structure of your business, obviously, like you would expect that your profitability increases and your free cash flow increases |
| I'd say it's two things: number one, a more stable operating environment will help that business |
| And pivoting a bit to more of a technical buyer where we find that we are more successful, just given the strength of our product |
| So we kind of -- we just got to free cash flow positive this year, in line with our non-GAAP operating margin |
| So I think one of the highlights of last print was the Communications gross margin, which was up 160 basis points |
| And so over a longer-term period, like the medium term, we do expect that the macro does improve, and so some of the short-term headwinds that we're dealing with start to abate a bit, and we do have a bit more of a stable macro environment |
| So I think that will play through that for probably most of 2024 and then see margins start to improve again in 2025 |
| Our voice product, our e-mail products are very high-margin products |
| So we do assume a more stable macro environment to be operating with TD&A as well, but also better execution, right? And so we've talked about the fact that we've now rebuilt the sales force, we've enabled the sales force |
| And we expect, we're optimistic that would continue, I would say, but just given the fact that it is our biggest business, it is usage based |
| Now we do see the sales force executing and getting productivity up to our expectations |
| And then when you look at the total company gross margin, I think that's the highest we've seen since 2021 |
| And so we think that we have a lot of opportunity to go into the international markets and grow there |
| So as it relates to the margin accretion that we saw in this third quarter, I think Communications margins were up like 160 basis points |
| And as we said on our earnings call, like while we saw a modest improvement in bookings sequentially from Q2 to Q3, they're not yet where we hope they would be |
| So we have a number of initiatives underway, like we have a pretty robust product road map that we talked about at SIGNAL |
| And so I would expect that as we continue to get more and more profitable over time, free cash flow follows |
| The piece that you're referring to, which is more of the infrastructure headwind, I would expect that to actually continue for probably most of 2024, and after which we would reap the benefits of having kind of built a more sustainable infrastructure |
| This was great, and thank you to everyone in the audience for joining us as well, too |
| We're seeing some really good deals being won, but more work to do to really kind of drive that, I would say, a higher level of looking |
| And so the improvement that you saw from Q2 to Q3 on bookings, that modest improvement is really just was driven by that |
| So I think we have some opportunities to continue to shift to some lower-cost geographies |
| So I think today, the Communications business is growing in the teens |
| So some traction, more work to be done there, like we'd like to see that trend continue |
| Statement |
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| And then as you know, there are other -- just back on the coms side, some short-term headwinds that we're dealing with as it relates to crypto and certain industries that have kind of plagued us for most of 2023 |
| So you've seen gross margins decline in Data & Applications over the last couple of quarters, which is when we started actually providing that information publicly |
| So on the data and app side, you saw gross margins dip below 80% |
| And so I'd just say that because, I guess, the concern that you're raising would be -- would result in kind of churn internal customers off our platform |
| And then as we think about the other side of the business, I know that there's been some pressure on that front |
| We played through -- we're playing through a very tough macro |
| We've played through two write-offs that have impacted our sales team |
| So in the short term, there is a capitalized software headwind |
| As it relates to NRR and things like that, now I would say for Q4, again, we'd expect sequential revenue to be growth to be more muted into Q4 and beyond that |
| And then obviously, the macro hit, and you had, to your point, a lot of companies having to contract there |
| Flip side, in the first quarter, we have the restructuring payments and severance payments we're making, so we had a cash headwind |
| We lost a little bit of money |
| And so we are seeing higher levels of churn and contraction in that business |
| And I'll come back and talk about churn in this business, which has been low and continues to be low |
| So one area that tends to be an investor concern is on the password-less opportunity, right? And what that could mean for Twilio longer term |
| I know you guys have been talking about seeing more stable trends on the Communications side, the data and apps business still sounds like it's under pressure |
| And we really haven't seen it move, right? And so it's been kind of that historically trended low, and it continues to be low |
| It continues to be low |
| underpenetrated internationally |
| Churn in this business has been low, and historically been low |
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