Good afternoon, and welcome to Twilio's Q1 2020 Earnings Conference Call. My name is Michelle, and I will be your operator for today's call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session. I will now turn the call over to Andrew Zilli, Vice President of Investor Relations. Mr. Zilli, you may begin.

Thanks. Good afternoon, everyone, and thank you for joining us for Twilio's first quarter 2020 earnings conference call. This is our first time conducting our earnings call from separate locations, so we appreciate your understanding if we run into any technical glitches. Our earnings results press release, SEC filings and a replay of today’s call can be found on our IR website at investors.twilio.com. Joining me virtually today are Jeff Lawson, Co-Founder and CEO; George Hu, COO; and Khozema Shipchandler, CFO. As a reminder, some of our commentary today will be in non-GAAP terms. Reconciliations between our GAAP and non-GAAP results and guidance can be found in our earnings press release. Additionally, some of our discussion and responses may contain forward-looking statements, which are subject to risks, uncertainties and assumptions. In particular, our expectations around the impact of the COVID-19 pandemic on our business, results of operations and financial conditions and that of our customers and partners is subject to change. Should any of these materialize or should our assumptions prove to be incorrect, actual company results could differ materially from our projections or those implied by these forward-looking statements. A description of these risks, uncertainties and assumptions and other factors that could affect our financial results are included in our SEC filings, including our most recent report on Form 10-K, and our remarks during today's discussion should be considered to incorporate this information by reference. Forward-looking statements represent our beliefs and assumptions only as of the date such statements are made. We undertake no obligation to update any forward-looking statements made during this call to reflect events or circumstances after today or to reflect new information or the occurrence of unanticipated events, except as required by law. With that, I’ll hand it over to you, Jeff.

Thanks, Zilli, and thank you everyone for joining us today. Before I begin discussing the quarter, I want to express that safety has been top of mind for us these past couple of months. Our decisions are driven by a belief that the safety of our team, our customers, and the world at large are what's most important. With that in mind, I hope that you all are faring well during this challenging time, and that you and your families and friends are safe and relatively comfortable as we ride this out. I also want to stress that the safety of our employees has been top of mind during COVID-19, and we moved to a fully distributed work model in early March. I want to thank our employees for their flexibility during this time and for their mutual support of each other and of our customers. You all exhibited the Twilio magic, and I thank you. While we wouldn't have wished it this way, in many ways, Twilio was built for this. Our platform provides three things the world needs: digital engagement, software agility, and cloud scale. Technologies such as messaging, email, voice, and video have enabled many parts of the economy to continue working while keeping its participants safe. Moving quickly, building prototypes, and iterating as our needs evolve has been critical for nearly every kind of organization. That's the essence of agility. And Twilio has enabled organizations to reimagine many of their communications workloads in days and weeks, not months and years. As you can tell from the numbers, Q1 was a strong quarter for the company, both before the COVID-19 impact again and as the impact is starting to be felt across society. Our diversified customer base currently consists of over 190,000 organizations, spanning many industries, countries, and company sizes, from startups to fortune 500s, non-profits, and even government bodies. This diversification served us well during this period of time. While some customers saw declines, others saw growth. As you can imagine, customers in hospitality and travel have exhibited very unusual patterns during this period. First, there were spikes in volume as airlines and hotels dealt with rebookings and canceled flights during the transition from pre-COVID-19 into travel restrictions and shelter-in-place protocols. Then, there was a stark decline as business slowed. Another example is that rideshares saw a large decline during this time, with offsets in many cases by sharp increases in demand for food delivery, curbside pickup, and retail logistics. In addition, telehealth and work-from-home contact centers saw a pickup of adoption during this time. While we are cautiously optimistic, no one can predict what exactly will transpire in the back half of the year given the uncertainty of the macroeconomic environment. So while we are certainly seeing headwinds to our business and certain industries, we believe that we have a resilient business model because of our diversified customer base. And long-term, we expect that usage in many of the impacted industries will return and others that may be newer to use cases will continue to grow in importance. We also saw other use cases where a project that was slated for sometime in the future became, "we need this now." And we made several product announcements in the quarter to strengthen our offering. We announced that several of our products are now HIPAA eligible, meaning customers can more easily utilize our voice, video, SMS, and fit products to develop communication workflows containing protected health information in a compliant way. HIPAA is another milestone for Twilio in elevating our data privacy and security to meet the needs of our HIPAA compliant customers. And we are committed to providing a platform trusted by customers and patients. We also released Flex Dialpad to public beta, enabling outbound calling from Flex Instances. We also announced Flex Boost, which provides technical, operational and financial resources for contact centers affected by COVID-19. Shortly thereafter, we also launched Video Boost giving qualified prospects three free months of our video API. We've seen companies across multiple industries adapt in real-time to the COVID-19. Digital transformation projects that could have taken years, such as transitioning from an on-prem contact center to the cloud, instead took a weekend. Developers and companies big and small got to work reconfiguring the world for a work-from-home and nearly 100% e-commerce reality. Let me give you just a few use cases across various industries that we've helped our customers with over the last couple of months. With shelter-in-place and social distancing going into effect, demand for telehealth solutions has soared. Virtual care became a new reality for doctors, nurses, clinicians, and millions of patients around the world and Epic, the company that supports the comprehensive health records of 250 million people, mobilized to build its own telehealth platform powered by Twilio's programmable video. The solution allows providers to launch a video visit with a patient, review relevant patient history, and update clinical documentation directly within Epic. Protecting customers and employees from unnecessary in-person contact became a top priority for many businesses including Comcast. Over the course of just a few weeks, developers at Comcast integrated Twilio voice into their homegrown customer database, enabling technicians and customer care to contact customers for service requests remotely. They also initiated a pilot to incorporate Twilio video into the same database, which can enable a customer to use the camera on their phone to show a Comcast technician their setup, and the technician can walk them through a self-diagnosis and repair without ever setting foot in their home. With widespread school closures, online learning has gone mainstream, posing new challenges to keep students engaged and on track with their studies. Blackboard is using Twilio SMS for critical communications to connect patients and teachers and keep students updated. And schoolclosures.org deployed a distributed contact center on its Flex in two days to connect families and teachers during the closures with educational specialists who have experience teaching from home. Nearly every contact center, especially those on-prem, needed to be reconfigured to support distributed workforces and increased usage. The city of Pittsburgh needed a way to enable 311 operators to continue to perform their critical work without going into the legacy on-premises call center as usage was spiking in response to COVID-19. They turned to Twilio Flex for a solution. And within four days, were up and running with agents working safely from home and no disruption in service for residents. Nonprofits have also had to scale up to support the unprecedented demand of the current environment. City Harvest provides New Yorkers with emergency food relief in a safe way through Trunk a Phone, an SMS reservation system built in partnership with United Way for New York City on Twilio. And with 62% more clients scheduling appointments and a 474% growth in volume of messages from partners. They are helping more people get food during this critical time. I'm incredibly proud of the Twilio team for how they've performed in the first quarter and how they've adapted to the ever-changing environment. We know that circumstances like these often bring opportunities, and based on the numerous new use cases and unprecedented digital acceleration that happened over the last month, I believe that this time has actually created even more long-term opportunities for us to address. As such, I'm even more excited about what lies ahead for Twilio. I want to give a thank you to our twilio.org team for everything they've done to respond to this pandemic. Within a week of COVID-19 being declared a global pandemic, clear.org donated $1 million to various organizations focused on driving the medical response to COVID-19 and serving low-income at-risk populations, who may be severely impacted by the virus. Twilio is also matching employee donations two to one for charitable organizations focused on the COVID-19 response, including the CDC Foundation, Global Relief International, Gift to Asia, and the International Medical Corps. These acts are part of our initial response to the pandemic, but we are acutely aware of more needs in communities around us and we'll continue our efforts to invest in our communities during this time of need. I also want to welcome a couple of new leaders at Twilio. We recently hired Christy Lake as our new Chief People Officer, and she'll be responsible for our global people strategy, driving the company's talent development and acquisition strategy, and growing the Twilio magic around the world. We also welcome Steve Pugh as our new Chief Security Officer to lead Twilio's global trust and security team, responsible for corporate physical and cybersecurity. We are excited to have you both on board. Before I hand it over to George, I want to thank those who are on the frontlines of this pandemic: the medical professionals, the truck drivers, the food delivery workers, the grocery store workers, the manufacturing workers, and everyone else who is playing a role in slowing the spread, or providing us with the stock shelves in our local stores. Thank you. Thank you for everything you're doing for the rest of us. With that, I'll hand it over to George.

Thanks, Jeff. Our team delivered great results in the first quarter as our investments in go-to-market continued to expand our reach. Customer engagement continues to be top of mind for companies, and we are helping them drive new ways of digital engagement. When we closed our offices in early March, the team did a great job continuing to engage with our customers. Our marketing team shifted several planned in-person events to virtual, with more than 30 virtual events in Q2, from the Twilio engagement center programs to roundtables to lunch and learns. Our first-ever virtual engage events held in mid-April had more than 1500 registrants. Our Developer Relations team also did a great job engaging our extensive developer community online, through Twilio TV and Twilio Quest and more. In fact, our developer community spent 150,000 minutes plus watching our live video content this quarter, 528,000 minutes watching on-demand video content, and averaged a total of nearly 100,000 minutes learning on Twilio quest. Thanks to the entire team for being there to support our customers and developers throughout the changing environment. I also want to thank our partner ecosystem for stepping up during this challenging time, providing needed implementation services and Twilio packages for mass alerts, remote agent contact centers, AI-powered bots, and more. As you heard from Jeff, COVID-19 has drastically accelerated digital transformation projects across many industries. We are uniquely positioned to help with our complete customer engagement platform. In fact, we saw a 25% increase in average daily sign-ups from March 18 through April 30 compared to the first 11 weeks of the quarter. This is a great opportunity for us to introduce Twilio to new customers or expand with additional products with existing customers, whether it's adding video for telemedicine, voice for IVR, or email for updates notifications. The current environment has presented multiple entry points for us to expand our long-term opportunity. But it's bigger than just individual channels as companies need to act quickly to move their contact centers to the cloud. Prior to this outbreak, it was estimated that of the roughly 15 million contact center seats in the market, about 17% were in the cloud. Now it is expected to be 50% by 2025. And Flex provides us a great opportunity to help companies with this transition with a fully programmable contact center platform. Let me discuss a few deals we signed in the quarter. As you know, expanding our international presence has been a key area of investment for us over the last couple of years. We've opened several new offices, and the percentage of our total headcount outside of the U.S. has increased from roughly 19% to 27% in just the past year. This strategy is paying off as we continue to land and expand with some great international companies. For example, we expanded our relationship with New Bank, the largest fintech company in Latin America. New Bank became a Twilio email customer in 2019, and turned to Twilio to help them scale their contact center to keep up with their growth. In Q1, New Bank chose Flex to power their several thousand agents on our trusted programmable platform. Thanks to our team in Brazil for building such a great relationship with New Bank. We also signed Flex deals with AB InBev, a fortune 150 conglomerate. We entered into a new relationship with Standard Chartered Bank, a Global 2000 company and leading international banking group with more than 87,000 employees across 60 markets. Standard Chartered, which has been in business for more than 160 years, is an incredible example of digital transformation. And they selected Twilio to build their new enterprise messaging platform to provide the flexibility, performance, and scale their needs to provide the best experience for their customers. We expanded our relationship with a Fortune 100 brick-and-mortar and online retail company, a brand many of you have likely interacted with recently. They're building a new workflow to expand our usage of Twilio SMS for their mobile and web applications. This new workflow will offer order and shipping notifications via text messaging to guests who purchase through those channels. Adding emails to the platform has been very successful, as it allows us to offer customers a single platform for their digital customer engagement. We also entered into a new relationship with a large car manufacturer that needed a new platform at a reliable deliverability for two-factor authentication for their customers, as their existing solution was not performing. They selected Twilio as their platform of choice, combining email and SMS to provide a more reliable and integrated solution to ensure a better experience for customers. We also expanded our relationship with one of the world's largest consulting firms as they add email to power marketing campaigns and customer notifications across several products. They chose Twilio due to our ability to quickly integrate into key applications across their business in over 120 countries, enabling product teams to ideate, test and deploy with little friction. Overall, we had a strong first quarter. Looking forward, we remain focused on supporting our customers through the current environment and ensuring our platform and our team are ready to support them as they adapt to this new environment. We're continuing our investments in our go-to-market efforts as we extend our enterprise presence, expand internationally, and grow our partner ecosystem. We believe investing in these areas today will set us up for the long-term. Thanks to the entire team for delivering these great results. And with that, I'll hand it over to Khozema.

Thanks, George. In Q1, we had a 57% gross margin, compared to 29% both last quarter and in Q1 2019. WhatsApp contributed approximately 7% of revenue. Verizon's ADP, or application-to-person messaging fee, was implemented on February 1 and contributed approximately $4 million to revenue. As a reminder, this was a direct pass-through to customers and did not impact gross profit dollars. First quarter non-GAAP gross margin was 57% and was negatively impacted by 70 basis points from ADP fees. We will continue to provide the financial impacts of ADP fees throughout the remainder of 2020. Non-GAAP operating profit came in at $6 million stronger than originally forecast. This outperformance was primarily driven by revenue favorability as well as reduced travel and office expenses plus slower than planned hiring. Now, let me discuss guidance. While we continue to see strength in our business, the macroeconomic environment remains dynamic, and we feel it best to employ prudence in our guidance philosophy. As such, we are withdrawing guidance for the full year. However, we're providing guidance for the second quarter and expect revenue of $365 million to $370 million, including ADP fees for growth of 35% year-over-year at the high end. To-date in Q2, we've continued to see a net increase in usage relative to our expectations and strong growth in the overall business, a testament to our resilient model and broadly diversified customer base. As Jeff said earlier, we believe we were built for this kind of environment. We've performed a variety of scenario analyses across use cases, industry verticals, and geographic mix to better understand possible impacts to our revenue. And while we're not going to get into the specifics of these scenarios, our revenue guidance naturally takes into consideration headwinds from the more heavily impacted industries like travel, hospitality, and ride-sharing, as well as the offsetting benefits from customers in education, healthcare, retail, and others. To note, customers that we categorized in those specific impacted industries have averaged less than 10% of Twilio revenue over the last several quarters. That number excludes email. In short, there are puts and takes and so far we've seen more puts. We expect the second-quarter operating loss in the range of $15 million to $20 million. As we discussed on our last earnings call, we view 2020 as the year of investment given the strength of our balance sheet as well as the size of the opportunity in front of us. Our intention is to continue investing through the cycle. We believe this is in the best interest of Twilio and our stakeholders and will continue to generate elevated growth outcomes for the foreseeable future, enabling us to come out of this current environment in an even stronger position. Let me give a brief update on each of the areas of investment we laid out on our last call. For our R&D Center of Excellence in India, we are leasing office space, but for now, we have virtually opened that office, continued with our hiring plans, and have onboarded a number of employees who are currently working remotely. We are continuing to hire for our go-to-market teams with a focus on enterprise reps, international expansion, and Flex specialists. This remains a critical investment as we continue to drive deeper into the enterprise and become our customers' platform of choice when it comes to digital engagement. Lastly, we continue investing in our systems and infrastructure. As Twilio continues to grow, we want to leverage the benefits of scale. We continue to invest in improvements in our billing systems, flow-to-cash, and other cross-functional areas that have been prioritized across the company to better enable our employees. We understand the ambiguity that exists in the world today as a result of COVID-19, but we are highly confident in the ROI these investments will generate for the long-term. Additionally, with more than $1.8 billion in cash and cash equivalents in the balance sheet, we feel we are in a position of strength to manage the business through this pandemic and come out stronger on the other side. A few other items to discuss before opening the call to questions. Our SIGNAL conference, originally planned for May, is now rescheduled as a virtual event for the week of September 28. We are still working through the details of making this event virtual and the related costs and will provide an update on our Q2 call. Keep in mind we will likely reallocate some of the planned SIGNAL expenses to other marketing-related areas. We're also postponing our Investor Day, which will also be virtual, aligned with SIGNAL, and are now targeting Thursday, October 1. Stay tuned for more information from the IR team. Finally, I wish everyone well and hope you're healthy and safe. Thank you for joining. Operator, please open the line for questions.

Your first question comes from Nikolay Beliov from Bank of America. Your line is open.

Hi, thanks. Thanks for taking my questions. Nice results here guys. And I hope everybody's safe and healthy. Just wanted to dig into the use cases. When I think about Twilio, I think about three main use cases: marketing, operations, and customer support. Maybe you can help us give us puts and takes in each of those and how those laid out for you during the quarter, and what trends are you seeing in the use case that you saw in the month of April? Thank you. That's it for me.

Thank you, Nikolay. This is Jeff. Khozema, you want to take it? Sorry, I have the coordination problem on this call, like usual.

I think some of the elevated use cases that we've seen so far, Nikolay, are really in categories, I would say. So, we talked about some of the headwinds, for example. But I think on the other side, in terms of like some offsetting benefits we've seen or use cases in education, healthcare, retail, which is more vertical look, relative to some of the areas that you called out. And I think what we're seeing is that through the first quarter, it's certainly on the back end of that and then as well, as we begin to start Q2, we've continued to see a slight net increase in usage relative to our expectations in part because of new use cases in some of those areas. And I think all of that just kind of goes to the broad overall strength in the business. The business is broadly diversified. We have a very resilient model, and customer base that spans geographies, industries, and verticals. So, I wouldn't necessarily call out a specific use case, but I think we're seeing elevated activities in some of those areas, obviously offset by some of the others that we called out.

Yes, this is George, I'd add on to that. I agree with Khozema, most of the trends we're seeing are by history. That said, we are seeing six use cases that are opportunistically coming forward for us under COVID. And the six are remote contact center, self-service, contactless delivery, distance learning, telehealth, and mass notifications. And those are some of the emerging use cases that we're seeing under COVID. Certainly not, we saw the core use cases that are going strong, but those are some new ones that we're excited about.

Great, thanks. And congrats on impressive acceleration in growth and take a big jump into new customer accounts in the quarter. I wanted to touch on the sales strategy here. Obviously, there's a lot of disruption with how people are communicating. You guys are talking about acceleration and digital transformation. I'm curious, are you seeing sales engagements move out of just the developer and more into the C-suite? And I guess, given this opportunity, what are you doing to lean in from a sales strategy standpoint?

This is George. I'm really glad that we made significant investments over the past few years in both our distribution and executive engagement programs, allowing us to build strong relationships with companies and capitalize on the current situation. We're experiencing growth across the industries I've mentioned. We are engaging at a higher level than before, as companies are making rapid decisions like needing to transform their contact centers in a matter of days. This reflects our longstanding strategy to move into enterprise markets, sell more strategically, and sell higher. We're continuing to execute the playbook we've developed over the years, with a focus on new use cases that I find very exciting. Our sales team has been well trained and equipped to address these six new use cases effectively.

You talked about Flex in terms of the addition of some of the new features here, and then the uptick in remote contact center demand also came up. Is there anything else you can add just in terms of how you've been able to react given the contact center market in particular seems to be undergoing a pretty big transformation in terms of what's happening and it certainly seems to us like Flex is well-suited to capture some of that.

Yes, this is George. In addition, I believe our product and platform offer great flexibility and quick deployment, which is ideal for this moment and supports work-at-home and remote agents. This situation has truly highlighted the value of our Flex solution. We've strengthened our service and partner capabilities by launching the Twilio Lightning program, which is designed to help Flex customers deploy rapidly. In some cases, we can address emergency situations in just a few days on the platform, which is very exciting. Our partner ecosystem is also stepping up, with over 40% of our Flex deployments in Q1 involving a partner, demonstrating the success of our efforts to strengthen not only the product and platform but also the sales and partner teams. We're enthusiastic about our continued progress in this area.

Just a couple quick ones for me. So one, obviously strong results in Q1 sounds like usage, as you said, is above expectations. When you look at guidance for Q2 and think about what you're seeing with customer behaviors, how much of your growth do you see coming from continued increase in usage at existing customers versus the behaviors that you're seeing in terms of continuing to onboard new customers as we move into Q2?

Yes, Matt, thanks for the question. I think it's a mix of both, honestly. We're certainly seeing additional tailwind from education, from healthcare, from retail, and some of the others that we talked about. I think at some point, those are going to moderate a little bit. But at the same time, I think what is also going to happen is that we're going to have some of the other use cases come back that have been down a little bit. And so I think, there are some puts and takes in the mix. But, as we said in our earlier remarks, like, what we've overall seen is that there's sort of been a tailwind here. I think in terms of the back half of the year, we're still cautiously optimistic about the way that things are going to play out there. We felt it was prudent to withdraw our guidance for that period, just given how dynamic things are, but we do remain cautiously optimistic. And I would say, certainly for the long-term, we're as excited as we've ever been, if not more excited.

Hi, this is Mark. Thank you so much for taking my question. I'm just wondering if you guys have any flexible payment options for the SMB and if they request Flex model payment, what's the policy there?

Yes. Let me just make sure that I understood the question. Have there been requests for flexible payment terms? Or have we seen any kind of deviations for SMB customers? Is that right?

Okay. We've received requests from a small number of customers around changes to payment terms or minimum commitments, and we're evaluating those on a case-by-case basis. But so far, we've not seen an impact on the business from those requests. And we've not seen a material increase in delinquencies and our good DSO is pretty stable, and there's no change in that really in Q1 relative to where it was at in Q4 '19 or other quarters.

Just wanted to dive into the Epic deal, kind of the telehealth market. I think Epic, or at least from some news reports, has been using a different video solution previously. So just what was it that they were looking for that kind of made them transition to a Twilio platform, and just level of engagement with kind of other telehealth providers would be helpful. Thanks.

Hey, this is George. Now, I think that one of the nice, I think benefits of the tailwind that we've seen is in our video product. It's a product that is I think really tailor-made for this period of time in terms of being able to be a) deployed very quickly, like all of our products, it's consumption-based so people can get started and try it without any barriers to entry. And it's also a fantastic product that can scale incredibly well and deliver excellent quality. And so I think that combination plus the fact that Twilio is now HIPAA compliant, supports HIPAA, and able to find DDAs, I think the timing worked out incredibly well. And so, intriguing part of that story is that, again, they started through the power of our developer community where a developer at Epic had a friend who was a huge Twilio enthusiast who actually used Twilio video and recommended us to help address some of their challenges. And they were able to through the power of our platform, get up and running quickly, try it for themselves, see the power of it. And that cycle end up being, I think, for us a relatively rapid cycle, because I think of the fundamental power of our business model and the power of this platform model worked hand in hand with the investments we've made an enterprise side with the DDAs. So I think, again, this deal really speaks to the power of our model, the strength of our strategy of having a multi-channel or omni-channel strategy, and the incredible combination of developer motion plus the enterprise investments we've made. I speak to all those and we're really thrilled to be able to support an amazing organization like Epic during this time period.

Thanks for taking my question. Glad you all are doing well. George just getting into your go-to-market motion given the changes, can you talk about how the changes happening and we talked about opportunity mostly in the cloud contact center market. Could you give some color on what kind of discussions you're having with customers? I can understand, at this point, some of the opportunity there to supplement the existing contact center. And what are the long-term opportunities you have there and how the pipeline looks?

Yes, that's a great question. Overall, as Jeff mentioned, this environment is prompting companies to intensify and accelerate their digital transformation efforts. It’s crucial for all of us to enhance our communication with customers through digital channels more than ever. This could include messaging, WhatsApp, video, and voice. During this time, all these channels are extremely important for the contact center. We are seeing strength across multiple products, not just in the contact center. What's remarkable about this opportunity is that, while it is challenging for our sales team since they cannot visit customers in person and are also facing their own personal challenges with social distancing, they are doing an excellent job of engaging customers and executives. In this era of video calls, where we are interacting from our homes, we are building stronger relationships. There are significant opportunities to establish deeper connections with customers during this time, and our sales team is capitalizing on that. One of these opportunities is indeed in the contact center. Many companies are reevaluating various aspects of their contact centers due to the current situation. For instance, I spoke with a customer using a BPO in their contact center. They suddenly needed to ensure social distancing for their agents and support work-at-home agents. This has led to significant transformations in the contact center, and it is clear that this will accelerate the shift of contact centers to the cloud. We believe we are well-positioned to benefit from this shift, given our business and technology model. We are excited about these use cases and the ongoing transformation, and we are actively engaging in this area, even amid challenges in certain industries.

This is Pinjalim on behalf of Mark. Congrats on the quarter and thanks for the question. Khozema, one question for you is, is there any way to disaggregate the upside versus your guidance between portfolio based and portfolio based SendGrid and the variable portion? Because I mean, just trying to figure out was there any material change in the contribution from variable revenue versus what you had expected before?

Yes. We're not disclosing those different buckets. I mean, I would say it this way that to reiterate a point that I made earlier, that I think what we saw in Q1 was simply a reflection of a broadly diversified customer base that had a strong performance overall. And we noted a few of the areas that were more economically challenged and then some of the areas that had tailwinds, but we don't break out those segments anymore.

Yes. As a company, we typically focus on the needs our customers have and building software that helps our customers engage with their customers across a wide variety of touchpoints. And I think that when you look at our business, the strength of our business as far as the size that we're at, and the pace at which we're growing at our scale, and the diversification of all the different products we offer to our customers, I think that we're in a very good position here in the United States as well as globally to serve our customers' needs. And that's what we really focus on, is following our customers and where they take us.

I had two questions. I guess, Jeff, the first one would be for you or maybe for George. Just how do you think about what we're going through making people even more cognizant of the need for those omni-channel touchpoints? And do you have a sense of kind of where you would have pegged penetration of a pure of a real omni-channel strategy before and how much that might be coming up in conversations with people now? And then the follow-up for Khozema is just the ADP impact for the quarter. I think you said it was $4 million, and I think you said it went into effect in February. Does that mean we should be expecting a $6 million benefit that's embedded in guidance for the second quarter? Thank you.

Let me just take the second piece and I'll let Jeff elaborate on the first piece. The second piece, we didn't specifically call it out for Q2, but you're in the ballpark.

Thanks, Khozema. So Heather, for the first part of your question, I think what you see going on right now is Twilio is becoming even more relevant to businesses in light of COVID. It takes many shapes based on the type of company that it is, for the industry that they're in, or where they're at in their digital transformation. But I think one thing is kind of clear that for companies who are engaged in a digital transformation, oftentimes these projects that were slated for quarters or years that we’re going to undertake, many of us got done in weeks. And so this is going to be seen as a great digital acceleration. In many ways, Twilio was built for this moment. We offer the three things that companies need as they are accelerating their digital plans. Yes, that is digital engagement across all channels, whether it’s voice or messaging, or video or chat or WhatsApp or Facebook Messenger - all these channels. Digital engagement, as we’ve moved so many in-person face-to-face workloads to digital workloads, we have the digital engagement. Companies need agility, so the ability to build quickly and to respond to changing conditions. That’s obviously then one of the biggest things that were going on in Q1, and Twilio provides the ability for organizations to be agile and to build iteratively as the nature of what they need to build and how they need to address the changing circumstances continues to evolve. And the third thing we provide is cloud scale. Now, this isn’t the moment where you can spend months planning your capacity requirements and re-rack your data center to plan for your peak; you need to build something, you need to deploy it, and you need it to work pretty much instantly. And that’s true of the cost scale, but also geographically to scale around. Twilio brings that to the table as well. So all-in-all, Twilio was built for this. And whether it’s digital engagement, agility, or cloud scale, these are things that every company needs, regardless of the type of use case that is top of mind for them right now. I believe the investments that companies are making are going to be durable, like the changes that are occurring in our society right now are going to persist in many ways. I think that many doctors’ visits, for example, are going to stay as telehealth visits after COVID is over. I think that many more e-commerce or food delivery or curbside pickup - a lot of these things that are getting normalized right now will start to become even more normal. The social distancing that is going on right now is changing our behaviors, and I think many of those behaviors will change permanently, and we can help companies to address those opportunities.

Two for me, maybe first Jeff, if we step back, you called out a number of growth vectors on this call attaching way more channels, acceleration and new customer signups, entry into new verticals, what sounds like from George a bunch of new mini Flex-like use case categories. I just want to ask you where is the biggest focus organizationally and which incremental growth sector is most either exciting to you or you most enthusiastic about?

First and foremost, actually our focus for the business has been the health and safety of our employees and our customers and our communities. I want to really emphasize that that's been priority number one for us through this crisis. Then as we think through, priority number two is how do we serve our customers? How do we help our customers to emerge stronger through this crisis? We see a number of areas to address, whether it is the new verticals that are arising. It wasn't because of COVID. What was a really coincidence that was fortuitous that we announced HIPAA support and the ability to sign DDAs in the first week in February, and that had been worked that we long planned to announce in that time period. Obviously, the timing was good for us to see a very rapid rise in the number of medical-oriented use cases that we could serve during this time. But as you as George outlined before, we do see really the six use cases that are driving a lot of opportunities right now. I see it as opportunities for Twilio and I see it as opportunities to serve our customers because they are under immense pressure to reconfigure their businesses and their organizations to serve their customers and to continue employing their people during this time. That opportunity to serve our customers in those six use cases is both good business and it's also a good way for us to serve our customers ensuring their success during this time. So think about healthcare, I think about distance learning, I think about automation. Our core products have stood up very well as far as messaging, as far as voice, as far as email being the ways in which companies need to engage with their customers during these times. We continue to invest in those, obviously, George just talked a bit about Flex and some of the Flex wins that you saw in the quarter which are some of the examples of organizations having to reinvent their contact center to accelerate their plans to move those contact centers into the cloud and into software in order to allow their people to work from home to open up new channels to scale up. Many organizations saw a lot of scale that was unprecedented while at the same time they were having to reconfigure where everybody is working. We're able to run all those things to customers.

Yes, this is Khozema. I mean, I guess I would start by saying that we're very well diversified across industries. So that helps to have a business model like that. That creates the kind of performance that you saw us in Q1. In terms of some of the impacted industries, we called out in our earlier remarks that as it relates specifically to ride share travel and hospitality, which I think have been more significantly impacted than others. They accounted for less than 10% of our overall revenue over the last several quarters, actually not just in Q1, and that's excluding email. So I think in terms of that, we feel pretty good about the diversity in the business. As we noted, if you look at some of the newer use cases that came on, typically in education, healthcare, retail, even in our .org, those have offset then some of the downside exposure that we saw in some of those impacted areas. So generally we feel pretty good. In Q2, I mean that trend has largely continued at least to-date. In terms of DB&E, which I think is what you're getting at in terms of seasonality and stuff like that. We're not really providing any guidance on DB&E; that’s not been our practice historically. Again, we feel great about the overall diversity in the business and what that was able to drive in terms of DB&E, so we'll stay focused there.

Hi, everyone. This is for Rich. Thanks for the question. I want to echo the comments on the strong results this quarter. Looking specifically at the geographic breakdown, it appears there's been a shift where domestic growth outpaced international growth this quarter. I'm curious about the factors influencing this change, particularly from a product standpoint, especially regarding email or SendGrid. Any insights you could share would be greatly appreciated.

Yes, this is Khozema. I mean I wouldn't read too much into it. Honestly, it was off about 100 basis points relative to prior periods. I would say it's in the ballpark of what we would have expected it to be. I don't think there was any particular trend relative to any of our categories there, just lots of moving pieces that can drive it one way or the other. I think the fact that we saw strong growth in our U.S. businesses on the back of some of the areas that we highlighted, particularly education and healthcare, is a good thing and I just wouldn't read much into geographic mix beyond that.

Jeff, really encouraging to see the vision laid out at the IPO and the diversification strategy paying off in spades here this quarter. If you'd asked me in 2016 if a large operator via a customer, i.e., Comcast, I probably would have said no. My question for you is, given we're seeing kind of this COVID induced acceleration in the digital opportunity, would you consider accelerating your build-buy strategy? Why or why not there? And then again, one quick follow up for Khozema.

Yes. Thank you, Brent. I mean, I think build-buy tools together means everything and yes, we are accelerating our build versus buying and we're celebrating the business as you can see. Yes, we’re continuing to invest in the long-term, and I think it’s the right thing to do because we see a lot of investments that we can make both in terms of product and distribution, as well as building the core systems and processes of the business in order to continue scaling this company for a long period of time. As we think about what's going on right now and the current pandemic environment but also the long-term that 5, 10 years from now, we see this essentially as some point a entry point for many even more long-term opportunities, both new kinds of customer relationships that we're going to build, new markets that we may be able to participate in, but also new products and you need this for all of our customers that are going to emerge. We are in a position to be able to invest. That investment can be organic or can be inorganic. With the balance sheet that we have, we see this as an opportunity to invest and to emerge from the COVID pandemic stronger.

Yes, so just in terms of the number that you cited, it was 7% of revenue. That's what we called out in our earlier remarks. It's predominantly one use case around account verification. We have a strong relationship with that company. We work hard at it, obviously every day. I'd have to get back on some of the specific numbers that you cited. They sound directionally right to me, but again, I have to get back to you in terms of specifics. But I think we just maintain a good relationship with that company. As I said, we work hard at it every single day. Just one other thing I would add about Jeff’s remarks around build-buy, on the buy side in particular, Jeff mentioned we have $1.8 billion on our balance sheet, which puts us in a position of strength. We raised that money in part to be opportunistic for a time like this. Obviously, we could never have anticipated a global pandemic when we did it, but I think that leaves us in a pretty strong spot to be opportunistic and we've got a lot of optionality going forward.

This is actually Phil Rigby on for Rishi. Thanks for taking the question. Can you just talk about what impacts you're seeing related to political activity in this environment? Just trying to get a sense of how spend there is tracking relative to your expectations.

I'll give the high level. I think as anticipated in politics, especially in the United States, messaging is proving to be a pretty effective medium for candidates to engage with likely voters. So, like it was in 2016 and 2018, I think 2020 will be a year of elevated spend by the political participants. We're not breaking out any predictions around that category of our business, but I would say it's playing out as we expected quite well this year.

All right. Thanks everybody for joining today. And we hope you are all staying safe and healthy and look forward to catching up with you over the next quarter or so.

Thank you everyone. This will conclude today's conference call. You may now disconnect.