Twilio Inc Q2 FY2022 Earnings Call

Good afternoon. My name is David, and I'll be your conference operator today. At this time, I'd like to welcome everyone to the Twilio Q2 2022 Earnings Conference Call. Thank you. Bryan Vaniman, SVP of Investor Relations. You may begin your conference.

Thanks, David. Good afternoon, everyone, and thank you for joining us for Twilio's Second Quarter 2022 Earnings Conference Call. Our prepared remarks, earnings press release, investor presentation, SEC filings and a replay of today's call can be found on our IR website at investors.twilio.com. Joining me today for Q&A are Jeff Lawson, Co-Founder and CEO; Elena Donio, President of Revenue; and Khozema Shipchandler, COO. As a reminder, some of our commentary today may be in non-GAAP terms. Reconciliations between our GAAP and non-GAAP results and further information related to guidance can be found in our earnings press release. The information provided and discussed today also will include forward-looking statements, including statements about our future outlook and goals. These forward-looking statements are only projections and expectations regarding future performance involving risks, uncertainties, assumptions and other factors that are described in more detail in our most recent periodic reports filed with the SEC, including our most recent report on Form 10-K and subsequent reports on Form 10-Q, and any amendments to any of the foregoing, and are available on our website and at sec.gov. Forward-looking statements represent our beliefs and assumptions only as of the date such statements are made. Actual results may vary significantly, and we expressly assume no obligation to update any forward-looking statements. With that, I'll hand it over to Jeff for some opening remarks, then we'll open up the call for Q&A.

Thank you, Bryan. Before we dive into questions, I'm pleased to announce that Twilio's customer and developer conference, SIGNAL, will be held virtually November 2 and 3, 2022, in the North American and EMEA region; and November 3 and 4, 2022, in APAC. SIGNAL is our flagship customer developer conference. We explore the intersection of technology, innovation and, of course, customer engagement, and we've got a really exciting lineup planned. The main event will be held virtually, and we will host two in-person customer events, our Creator Summit and our new CDP Summit dedicated to our marketing and segment customer audience. Our virtual Investor Day will also take place in alignment with SIGNAL, and more to come about that Investor Day soon. So, with that, let's open the call for questions.

We'll take our first question from Derrick Wood with Cowen.

Great. Elena, maybe I'll start with you. You've been there for a few months. I just wanted to kind of hear what sort of tweaks you're looking to make in the go-to-market and things around account structure and product focus and kind of what things you have in mind as you build through the year, and particularly how you're trying to design that to help kind of move more up stack with both the sales force and the partner ecosystem.

Thanks, Derrick. Really appreciate the question. It's been an exciting, eventful few months here. And I'm super excited about the opportunity I had. Listen, there are a few opportunities we've identified to drive our focus and time toward the highest value outcomes in the business. We're at different stages of executing across each of those. First and foremost, I feel like the organization, our processes, our systems, our tools are really ready to work harder for us. And I think what that means is that we should be working much more toward applying human touch to the moment in the customer journey that really requires it and to the solutions and solution-selling moments that really require it as well. So we're looking for efficiency there. We're also finding efficiencies in marketing and ensuring our pricing is reflective of the value that we're providing, while exploring new and novel ways to tap into that vibrant partner ecosystem that you mentioned. All of that is leading to an opportunity for us to shift more of our selling capacity to software, while also making sure that we're leveraging more self-service capability for customers that don't actually require hand-to-hand account coverage. I think the opportunity we have is massive in those areas. I feel like we have tremendous assets to work with, both in our client relationships and also in our team and products as well. So I'm excited to begin to push on those levers more aggressively and to just watch our software-selling motion take off from here.

Great. And I'm sure investors certainly would like to see that. And I guess for Khozema, the direction of gross margin coming back down in the quarter, I guess a little surprising given you guys raising pricing in the quarter, the thought that you'd see a higher mix of domestic messaging post the 10DLC registration stuff. And even if I look at international mix at 35% of revenue was flat sequentially. So I know it sounds like you're calling out international mix, but are there other components at play perhaps within international where costs are going higher? Can you just give a little bit more color on the puts and takes on gross margin and perhaps how to think about it directionally in Q3?

Yes. I mean, by and large, the way that you characterized it is right that the decline in gross margin is largely driven by our strength in international messaging. I think one thing that you do have to bear in mind as you think about the 35% sequentially quarter-to-quarter is that it's based on where the customer's address is or where traffic originates, not necessarily where that traffic ends up terminating. And so as we have both U.S. customers as well as customers that reside internationally, that continue to send messages internationally, you're going to have a slightly lower gross margin just as a result of the fact that international messaging margins are structurally lower, and that's kind of what's been the drag on our business. What I would say is that, in general, while that has kind of a margin rate effect, we do feel good about the growth in overall messaging, and it's still a major entry point for us with customers and it opens a lot of opportunities related to what Elena talked about a moment ago. And so we still feel good about our 60% plus gross margin target longer-term. But in the shorter term, we are taking on some business. Some of that, in large part, is international. As long as it's profitable business and drives gross profits back into the business, we like that business, and we're happy to take it on as long as it pulls through the Flex segment over time.

Next, we'll go to Meta Marshall with Morgan Stanley.

Great. In the prepared remarks, you guys mentioned that you would not be immune from macro factors. I just wanted to get a sense of how those are manifesting thus far, and how you're being proactive with customers where you can help them optimize that spend.

It's Elena here. We feel that, in general, companies are continuing to prioritize investments that drive revenue and efficiency. We're fortunate to have products in all of those areas. We haven't observed any significant decline in demand yet. However, there are some exposure areas worth noting, particularly in SMBs, consumers, and digital natives, which could be affected by a prolonged downturn. On the positive side, we have some sectors that are likely to perform well. We've noticed a few recent isolated areas of weakness, particularly in crypto, consumer on-demand, and social sectors, but this impact is not significant. While we don't believe we're immune, our products are well-positioned for continued investment. We're closely monitoring top-of-funnel metrics, cycle lengths, and similar factors, and we remain diligent in our analysis and response should we notice any further softness.

Yes. I would like to add to what Elena mentioned about the resilience of the business. While we have encountered some isolated challenges, nothing significant has emerged so far. However, we are aware of how our peers are discussing the current macro environment, and we are preparing ourselves for various scenarios. You may have noticed that we are slowing down hiring except in certain key areas. We also provided guidance based on a real estate charge, which aligns with our remote-first work strategy moving forward. Both of these actions will contribute to our profitability next year. Regardless of the macro environment, we are committed to being profitable next year, whether it affects our growth or not.

Got it. And then just was there any FX impact that’s worth calling out–

Not really. We have a hedging program. And I think in general, that kind of blunts the impact of any FX. And so it tends not to be a material impact to our business.

Next, we'll go to Will Power with Baird–

I want to ask about the significant Flex win you announced in the quarter. It seems like a substantial achievement for you. I would like to hear more about the processes that were changed. Is it specific to one segment of the business, or can you share insights on your competition? Any lessons learned would be valuable, as this appears to be a promising reference point for the future.

Got it–

We are really excited to have signed the largest Flex deal ever in Q2. This indicates the ongoing momentum we are experiencing at Flex and with our Customer Engagement solutions. The Fortune 100 retailer we mentioned was already a customer of our communications APIs, which demonstrates the traction we are making with our strategy of building relationships and moving clients from core APIs to broader customer engagement solutions. The connection between brick-and-mortar stores and virtual stores using Twilio Flex, video, chat, and messaging is crucial. This solution addresses various channels, and their data-driven, cross-channel needs will create a unified view of the customer across their organization. This will allow them to provide seamless, personalized, and exceptional customer experiences throughout their marketing, sales, and customer service efforts. They are reimagining the customer lifecycle in a high-touch manner across all these channels. Few solutions can truly empower emerging customer engagement like comprehensive lifecycle solutions. We were in a competitive landscape filled with known players, but this is where Flex excels in addressing new and emerging requirements from customers who want to transform their engagement approach, not just for support but throughout the entire customer lifecycle across multiple channels and venues. We are thrilled about this new customer, and I believe it is a fantastic win for the platform. We look forward to ongoing customer success.

That's great. I appreciate that. And maybe just to follow-on real quickly on the macro front. Anything you can call out with respect to linearity kind of across the quarter? Did you start to see more relative weakness late in the quarter? And how has that maybe trended past that? Anything you could call out just with respect to geographies? Europe versus elsewhere?

Will, this is Khozema. Not really. I mean, I think globally, we had a pretty good performance across the board. I think, we called out a couple of sectors where we did feel it. We called out some sectors where we saw some ups as well. So far, at least, it's been pretty balanced for us. We haven't really seen any signs of anything material yet. We're obviously watching it closely. As I said a moment ago, we're certainly paying attention to what our peers are saying and what's happening in the macro environment more broadly. But I wouldn't call out anything beyond what we did, certainly not geographically.

Next, we'll go to Samad Samana with Jefferies.

Maybe first just on the shifting of the selling capacity on the software side and looking to leverage more self-service capability for customers that don't need direct account coverage. Maybe, Elena, could you help us understand better? Is that even for the application layer like Engage and Flex that you're trying to do that as well and for Segment? Or is that more for the traditional messaging side? Just help us understand who that's directed at in your base and what that customer looks like and how we should think about that going forward.

Yes. Great question, Samad. Thanks. I think that, that motion can apply to all of our solutions, but I think it's most effective in our more transactional messaging deals. You'll see us push on it harder there, but we really believe that there's a motion across all of our solutions, where they're discoverable by developers, where developers have a moment where they can experience the solution, they can play with it, they can build around it. And then that can lead to bigger and bigger deals and engagements with clients. That said, we also know that with these solutions, there are pipelines being built and deals going down in the market every day, and we want to make sure that we're meeting customers where their sales cycle is taking them and with what their process looks like. So we'll have enterprise selling motion across all of that as well. But we believe there's really sort of exciting opportunity for us to push harder on self-service and messaging. But that doesn't mean that we won't also have those motions working really well across Segment in Engage as well as Flex.

Great. Can I ask a follow-up question about the guidance? Does the Q3 guidance include revenue from political messaging, or will that be excluded when considering organic growth? I'm trying to ensure we have a clear understanding of what is included in the organic guidance.

Yes. It will be included. We're not excluding political from the organic guide, but I would say that it tends not to have much of an effect or as much of an effect in Q3. It tends to be more of a Q4 phenomenon. So I wouldn't expect much of an uplift relative to political in the overall guidance.

Next, we'll go to Michael Turrin with Wells Fargo Securities.

Okay. There's definitely a lot happening in the model and the macro environment right now. We've received several questions from investors regarding the 30% organic revenue growth rate. Despite all the changes, you exceeded that expectation this quarter. The guidance indicates that we should be close to or above that growth rate next quarter. Can you discuss the current organic profile of the business and the factors at play? If the urgency and adoption trends you observed start to normalize, are there specific priorities for the sales team to focus on in this environment?

Yes. Let me start. This is Khozema, and then I'll hand it over to Elena to talk through in a bit more detail from a sales perspective in particular. So I'd say, just to start off with, as we mentioned, that so far at least, like we're not really seeing any material impacts in our business relative to kind of the macro picture. Obviously, we're watching that macro picture quite closely. We monitor our business very closely. It's usage-based, so we're getting signals day-to-day about that. But as I said, so far, we're not really feeling anything material. In terms of Q2, we feel really good about the way that Q2 and frankly, the first half played out. We feel quite good about the setup in the second half as well. We're guiding, obviously, to 30 to 32 on a reported and then 29 to 30 organically despite kind of a bleaker macro picture perhaps than where we were six months ago. I attribute that largely to the business remaining resilient. While we have seen some pockets of softness, we're just not seeing that in kind of a broader brush yet. In Elena's prepared remarks, what she alluded to was that we are seeing some longer sales cycles, but that's being offset, in part, by volume gains in some other areas. So I think sitting here today, based on what we know, what we see, we feel pretty good about certainly our first half results and the setup for Q3 as well. That said, there's a lot more work for us to do given the magnitude of the opportunity in front of us. And so given that, let me turn it over to Elena to talk through that.

Yes. I mean I think for us, like our focus is still very much on making sure that we are harnessing the demand that's out there and just making sure we're introducing the best of everything we have to operate into the market. As I mentioned earlier, we are continuing to kind of move our focus up stack, making sure that we're investing in those areas to drive long-term growth with a high, high focus on profitability. I think Kho said it well, like we're not seeing significant degradation of demand. We've seen cycle lengths just in a couple of very, very small pockets, push out a little bit. We're not hugely concerned in that it hasn't become a pattern. It's just something that we're watching really closely. But I feel good about the setup going forward. I feel good about how the team is focused and moving in the right direction, and we'll continue to watch it and make sure that we're responding accordingly and adjusting our message to the market accordingly. Again, we think that our solutions are really well suited to this point in time. So even if budgets are for a short period of time scrutinized or held as people are sort of holding their breath waiting for additional economic data, we also feel really comfortable that when the exhale happens, we're there waiting and that we present a really phenomenal opportunity particularly in our solutions that allow people to know, engage, sell to, sell through their own customer base that we stand to benefit from that in the end.

Okay. All right. We'll go to our next question. Next, we'll go to Nick Altman with Scotia Bank.

Great. Yes. Good to hear that you reaffirmed your commitment to profitability in 2023. But just given there's a handful of one-time costs related to the office closures and the sabbatical program that are sort of pressuring 3Q, how should we be thinking about EBIT margins as we sort of exit this year and then kind of going into 2023?

Yes. That's a fair question. So thanks for asking it. I think the way that we're thinking about it is that irrespective of kind of the macro environment that we intend to be profitable in 2023. We've thought through a number of different scenarios that could play out that even if there were growth impacts, we still intend to be profitable in the coming year. In addition to that, we continue to see this massive opportunity, as Elena has been talking about, with respect to the software aspects of our business, in particular Segment and Flex. In terms of the two dynamics that we called out in our prepared remarks, one of them being the real estate. The real estate charge, that's a one-time. It's non-cash. It will start to show up in our operating results next year. And then in terms of the second one, that's also a non-cash charge, and then there'll be some kind of carryover period to period that it will be relatively de minimis in the scheme of things. What we're guiding to for the time being is profitability into the next year. We're not guiding to a margin rate associated with that EBIT number. But what we're committed to doing is delivering profitability into the next year.

Okay. Okay. That's helpful. And then it just sounds like there's sort of a greater pivot to Segment, Engage and Flex. And I'm just curious sort of what's driving that? Is there something you're seeing in the end market where maybe the end market for those products is becoming a little bit more attractive or sales productivity selling those products is ticking up a bit? Or is it more sort of you guys are pivoting to selling those products with a higher gross margin profile than the overall business?

So I'll say a couple of things. And then Jeff may want to weigh in as well on that one since it's such a sort of large strategic question. But I would say a couple of things. First, messaging and communication end up being the last mile of the things that originate up in the marketing space, in the customer care space, etc. So we think it's a very, very natural progression that where we started with a fantastic business in communications that we then help customers make sure that those communications are the right communications at the right time, through the right channels, to the right individuals to make the whole flywheel turn better and faster. It happens to have the characteristics of helping us create a better economic profile from a margin perspective for the business long term. But we also think it's just a really, really natural move from a customer perspective. Jeff, I don't know if you have anything you'd like to add to that?

Thank you, Elena, for your insightful remarks. I'd like to provide a couple more points. Customers approach us seeking voice, messaging, or email solutions because they have specific business objectives in mind. Usually, they're focused on enhancing their marketing, improving sales processes, making their products more engaging, or providing better service and support. They use our communication tools to achieve these goals. When we engage with customers, we often identify opportunities to assist them in reaching their objectives quickly and effectively by taking on some of the burdens they face. We observe trends, such as a surge in customers seeking improved contact centers or enhanced identity verification and marketing across different channels. These present opportunities for us to facilitate customer success and offer them greater value, creating a win-win situation. Our approach began with foundational channel APIs. As we better understand customer needs and widespread challenges, we can address those issues. This not only enhances our gross margin as we solve software-related challenges but also accelerates the time to value for our customers and contributes to their success. From a strategic perspective, as we expand our business and increase revenue, our focus is on generating profit by helping customers create and deliver meaningful communications with their audience, rather than just increasing the volume of communications. In today's world, we all recognize there's an overload of messages and emails. However, businesses truly desire more engaging communications and more captivating customer journeys. This represents a significant opportunity to align with what our customers genuinely want, which is to engage customers more effectively, not just increase communication quantity. This approach aligns with our strategic objectives as well as those of our customers and end users. Overall, as we pursue more software solutions, we aim to drive better outcomes and forge stronger customer relationships.

Next, we'll go to Mark Murphy with JPMorgan.

I am curious, maybe for you, Khozema, how would you assess the response to the SMS pricing increase? I'm wondering if customers view it as reasonable and to be expected in an inflationary environment? Or do you think that volume growth would degrade slightly as you roll that price increase through? And I have a quick follow-up.

Yes. Mark, we haven't really seen much of a detrimental impact to the business. I think volume is broadly held up. We haven't seen a lot of resistance to it. I think it's pretty reasonable in an inflationary environment. As we've talked about in the past, we feel really, really good about our technology, and we do feel like it deserves a premium relative to the competition.

Could you describe the trend in the video portion of the business? Jeff, you've had several innovations there, including an application for hosting conferences and virtual events and embeddable video. Can you help us understand the kind of experimentation you are seeing and provide any insight on the trajectory or prioritization of video?

Yes, absolutely, Mark. So we've got our video platform started off. The first several use cases were small group conferences and the big group conferences. Then last year, we launched Twilio Live, which provides for live streaming experiences, interacting streaming experiences. I think this is still an area for us of experimentation, to be honest. I think the video market is still sorting out. There was sort of the market that existed and then COVID came along, and there was a flow year of activity. There's been some experimentation by entrepreneurs and by bigger companies. But it's really small for us in the grand scheme of things. I think it's a really interesting investment area because I do think that video is ripe for some more disruption, more interesting applications, whether it's live shopping or live interactive conferences, etc. But it's just small for us in the grand scheme of things, and it's one of those long bets that we have.

Next, we'll go to Brent Bracelin with Piper Sandler.

I appreciate you haven't really seen any sort of macro headwinds to the business, but we are absolutely seeing churn pop-up in other customers, particularly customers, vendors that have exposure to that SMB smaller customer cohort. I know your software is free, right? So you only pay for what you consume. But as you think about the environment shifting here, have you seen any sort of change in the consumption patterns and messaging patterns, in the smaller customer set? Obviously, the return to travel is something that is real. Lots of people are traveling, and so there's got to be some offsets. But I'm just wondering, as you think about maybe the smaller customer cohort, are you starting to see any sort of change in volume or messaging patterns that might be maybe offset by larger customers?

Yes. It's a good question. This is Khozema. Let me start, and then I'll let Elena comment as well. One of the things that we've been doing quite actively is analyzing the business along a number of dimensions, as we alluded to in our prepared remarks. We have been looking at it based on customer size, and at least so far, we're just not seeing much of an impact based on those cuts. Now we did call out a couple of pockets of softness in Elena's section of the prepared remarks, where we commented that, for example, in crypto, social, or on-demand related activities that we're seeing a little bit of a slowdown. But on the flip, we are seeing strength as well in financial services and IT-related spending. That said, as you alluded to in your question, we do have a usage-based business where we get paid based effectively on the basis of every event. We are looking at it very closely, and we're certainly planning for a variety of different scenarios that could unfold. We just haven't seen them in our business just yet. Irrespective of how those things play out, we're still planning to be profitable into the next year, and that's kind of how we're running the business today. But let me let Elena comment more on SMBs because I think that was kind of the basis of your question. Elena?

Yes. So I don't have a ton to add. I would just say it's very natural to sort of assume that as economic difficulty creates this kind of a moment that the investments that SMBs are making those down, so may not be around over the next number of quarters or years. But we're also excited about the fact that it's also a window for new innovation to take back up and new company starts to get involved and to send messages and utilize software. We're definitely watching it. But I will tell you, and we don't break this out, I would say in my organization, we call the group that looks after SMB our growth team. We're pretty pleased with their performance thus far. So that's the only thing I'll add is that we're still watching, excited about the progress that team is making. But really sort of where we've seen softness has been much more use case or vertical oriented in the areas that you'd expect and that we talked about in our prepared comments. That's it.

Next, we'll go to Ryan Koontz with Needham & Company.

I want to reflect on Zipwhip, if we could. And I really appreciate it's an innovative and unique product. Can you tell me, is it fully integrated into the company now? And how do you see it performing, that are the A2P fees? And what are your expectations for the business going forward in terms of any synergies with that?

Yes. I mean we're not breaking it out, per se, but I think we feel great about the Zipwhip product. I think we feel even better about the Zipwhip team. I think they've integrated really nicely into the business. I think a number of different thought leaders that came with that team as well that are helping us innovate. The business performance, as I said, is going really, really well. Obviously, there's an A2P fee component there, too, which we break out for you all. But I really have nothing but very positive things to say about how Zipwhip has been performing.

Next, we'll go to Ryan MacWilliams with Barclays.

I know that the Syniverse agreement has gone into effect. Would you expect any material benefit to gross margins in the next quarter? And do you think there might be any better visibility into gross margins going forward after this agreement?

Yes. I mean, as you pointed out, we concluded the Syniverse transaction, and we feel good about having them as one of our partners. We did business with them for a long time, and strengthening that relationship through an active investment felt like a great next step for us. We have a commercial agreement alongside the investment that we took, and that provides some benefits to the business. We're not guiding the gross margins into the out quarter. We're committed to our long-term model, over 60% plus over time. But I think rather than not necessarily happening just through a price increase for the Syniverse arrangement, it's largely going to come through the growth in our software business, which is, in part, one of the reasons that we're so excited about it. So Syniverse is definitely accretive and will be helpful over time. But I wouldn't read too much into it having an impact in the next quarter or so.

And there's quarterly fluctuations in deferred revenue, which might not be the best indicator of segment momentum. But is there any color you can give around how Segment is doing at this point? And also maybe any update where we are in regards to the Engage rollout?

The Segment is going really well, and it's been performing well for a long time for us. I mean, we're really, really excited about the addition of that product and that team as well into the company. Obviously, it comes with a nice software attach. I think it's very additive to what we're trying to do and have been doing for some time with our communication stack. I think we bring that all together with Engage. Engage is still planned for a later in year launch, as we've been saying for some time. We're super excited about the way that beta program has been going. I think we've been oversubscribed there for a while. Elena will probably know better than I, but I think we feel good about that momentum. We feel great about the way the Segment has been performing. Obviously, that business is integrated fully. Yes, we're excited to launch Engage soon.

Okay. Next, we'll go to Siti Panigrahi with Mizuho.

This is Abhinav on for Siti. I guess the first kind of question would be just with Google delaying recently their application of third-party cookies now, again, from 2023 to 2024, have you seen or do you expect this to change the demand environment a little bit around CDP's customer engagement more broadly and maybe that transition away from third party? And do you see some of the urgency kind of diminish for some of your customers that are coming in?

We're talking over each other. We're in different places, if you haven't figured that out yet. Thanks for the question. Yes, I think what we see is that it's relieving some pressure off of companies. Considering that 2023 is not far away, it's reasonable to allow more time for such a significant change in the Internet ecosystem to take effect. We conducted a survey and found that about 70% of companies were not prepared for this change, which creates demand for our products. It's unrealistic to expect that such a large number of companies will suddenly be able to completely overhaul their technology in just a month. While this gives some breathing room now, it still represents a favorable environment for the CDP, as customers have additional time to thoughtfully implement these changes. We are already witnessing impressive success stories from our customer base, which boosts their confidence that this first-party data approach will not only be feasible but highly advantageous. Two notable stories are Allergan, which utilized Segment to achieve a 41% decrease in customer acquisition costs, and Domino's in Mexico, which used Segment to create smarter customer audiences, resulting in a 700% increase in return on ad spend. These results are remarkable, especially considering the current economic climate, where marketers must be incredibly efficient and demonstrate return on investment for their ad spending. Companies that are proactive are not only returning to where they were before the privacy changes but are also exceeding those levels and showing significant improvements in their advertising efficiency. This trend is likely to drive demand, compounded by pressure from Google pushing companies to adapt. While this pushing factor is impactful, the higher return on investment that customers experience when using our CDP to better understand their customers is an even stronger motivator. Various elements are contributing to this shift, not just the cookie situation. Cookies certainly play a role, but in this environment where ROI is crucial, Segment has a compelling narrative.

Yes, definitely. That makes a lot of sense. I appreciate the color there. And maybe just one quick follow-up on kind of the political messaging of volumes this year. Have you seen any indication about how it's trending versus historically? Whether you'll see more volume this year based on maybe just the political environment in general or maybe kind of just waiting to see how that trends into Q3 or Q4?

Yes, this is Khozema. I think it's kind of a wait and see. We haven't seen anything idiosyncratic yet. I mean we've modeled some for Q3, and it tends to pick up a little bit more in Q4, but nothing that I would call out.

Next, we'll go to Patrick Walravens with JMP Securities.

So Jeff, going back to Engage, the October '21 press release said it would be GA in Q1 and now it's moving to Q4. You guys obviously said to expect time. I'd love to hear why. And then just secondly, on the Engage topic. With that, you're going to be competing more, at least that's the perspective from some investors against some of your great customers like a Brace or like a Deal. How do you manage that?

Patrick, yes, happy to answer those questions. First of all, GA launch is still expected for the second half of this year. We've got great customers on board with the beta. And as I think Kho said earlier, too many customers wanting into that data, which is a good problem to have. And as often happens in the beta, you learn about which of the most valuable parts of the product, which are the parts that are most differentiated, and it directs our roadmap. And that's exactly what's happening here. We're learning great things from our customers. I think our customers are telling us that we are on a great path, and it shows that there's real latent demand for the solution that Engage is providing. The second of your question is how are we managing the partner ecosystem. It's a great question because it's not a direct competitor necessarily to those other solutions. There could be some areas of overlap for sure. But there are a lot of different ways to approach building omnichannel marketing. Our approach is to really start with the data. Our point of view is that the hardest part for a marketer to get right is actually having the right data and best profiles to drive what they're wanting to do. There are other solutions that are more focused on, say, the campaign or analytics, and those are gears to focus on. But ours starts with the data and then activating that data. What we've actually seen in some of our early beta customers is that what they want to do is use Twilio to drive building that data and then activate it. They may activate it with a campaign of their own that they build on Engage, which could be an email campaign or a text campaign, but they may also want to trigger campaigns that are in other marketing tools. We've seen opportunities to deepen our partnerships because we're here to help power our customers' tech stack. Bringing data in and activating that data is really a net new area of the tech stack. That's an area of investment, and I think marketers are going to increasingly spend money on having the best data and the speed of that data, having real-time event-level data for all their customers.

There are no further questions. This concludes today's conference call. You may now disconnect.