Twilio Inc Q2 FY2023 Earnings Call

Good day, everyone, and welcome to the Twilio Second Quarter Earnings Conference Call. At this time, I would like to hand the call over to Mr. Bryan Vaniman, for opening remarks. Please go ahead, sir.

Thanks, Lisa. Good afternoon, everyone, and thank you for joining us for Twilio's second quarter 2023 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 Twilio Data and Applications; Khozema Shipchandler, President of Twilio Communications; and Aidan Viggiano, Chief Financial Officer. Due to an issue with our external website vendor, the prepared remarks were only recently posted to our IR website. Thus, the team will be reading these live at the outset of the call. As a reminder, some of our commentary today will include non-GAAP financial measures and key metrics. Reconciliations between our GAAP and non-GAAP results and further information related to guidance, definitions and key metrics can be found in our earnings press release and the appendix of our prepared remarks, both of which can be found on our IR website. 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 subject to known and unknown risks, uncertainties, assumptions and other factors that are described in more detail in our most recent periodic reports filed with the SEC, including our annual report on Form 10-K and our subsequent quarterly reports on Form 10-Q, which 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, except as required by law. I'd also like to highlight that following our recent field reorganization into two business units, beginning this quarter, we will be reporting our revenue and non-GAAP gross profit results in two segments, Twilio communications and Twilio Data and Applications. With that, I'll hand it over to Jeff to open the prepared remarks.

Thank you, Bryan. We closed out a strong second quarter, over delivering on both our revenue and profit targets, and generating record quarterly non-GAAP income from operations of $120 million. We begin the second half of the year energized by the progress we’ve made to date in Communications, confident that we’ve laid the foundation to reaccelerate growth in our Data & Applications business over time, and optimistic about AI’s potential to be an accelerant for Twilio’s vision. We also remain committed to continuing to deliver against our profitability targets in any financial environment. We’ve made substantial strides on our path to GAAP profitability and have substantially increased the operating margin profile of our business. In Q2, we reduced GAAP loss from operations by over 50% year-over-year, drove a continued reduction in stock-based compensation, and delivered $72 million of free cash flow in the quarter. We’re executing well against our commitments, and as a result of our strong performance for the first half of the year, we're raising our full-year non-GAAP income from operations guidance to $350 million to $400 million. A business transformation as big as what Twilio is taking on takes time. It requires tactical focus in the short term and a bold vision for what’s possible in the long term. Twilio’s Act 1, Communications, has been a success in terms of scale and efficiency. Our Communications business continues to deliver against the objectives we’ve set, driving efficient growth while we target ongoing operating leverage in the coming years. And we're now building Act two based on our belief that Twilio’s data asset, when combined with the power and reach of our Communications platform and accelerated by AI, can unlock value for businesses that we are uniquely positioned to deliver through our innovative combination of product offerings. While I don’t expect the road ahead to be linear, we’ve embarked on a massive market opportunity, one that has the ability to transform the status quo for customer engagement. Now, to where we are today: In Communications, we delivered a strong quarter and are encouraged by continued signs of stabilization across our customer base. The efficiency actions have proven to be the right ones and the business is delivering with a more streamlined operating profile. Following our largest email deal in Q1, the team signed our largest ever messaging deal in Q2, an exciting milestone for Twilio at this scale. As a part of our efforts to focus on doing fewer things better, we also recently completed the divestitures of Twilio's IoT and ValueFirst businesses. The usage-based nature of our Communications business makes it sensitive to macro conditions, so the team continues to manage towards gross profit growth and driving leverage. Khozema will share where the team is focused on driving further efficiencies while capitalizing on our growth opportunities through the second half of the year and beyond. In Data & Applications, we are continuing to focus on executing against our go-to-market rebuild efforts. We now have sales reps ramped in our most critical areas, and we are optimistic that our bookings will improve towards the end of the year and that revenue growth will accelerate during 2024. Elena will share more about our progress here. In June, we previewed our vision for CustomerAI, which we have designed to layer predictive and generative AI capabilities across our platform at every customer touch point. As I shared last quarter, I believe the real value unlock for artificial intelligence will be pairing large language models with first party data sets. We believe this is where Twilio is most differentiated through our data asset. Segment’s customer profiles will become even more data-rich with AI, accelerating our data and communications flywheel. By training large language models for customers with their data that lives inside Segment, Twilio will help customers enter the AI race multiple steps ahead of their peers. Twilio's ability to drive that level of differentiated customer value proposition has the potential to be a significant tailwind for our business. We’re also excited to be building an ecosystem of partners and integrations including Google, Databricks, FrameAI, and OpenAI to power some of CustomerAI’s generative capabilities, as well as AWS to power predictive AI use cases within Segment. I can't wait to showcase several of the products that will advance our CustomerAI vision at SIGNAL on August 23rd, just a few weeks away. I’m proud of the team for navigating through a lot of change as we reoriented the company over the last several quarters. This is a team that has executed well against our plans, as evidenced by the speed in which they have adapted to the new structure of the business, driving greater efficiency and having delivered over $220 million of non-GAAP operating income through the first two quarters of 2023, exceeding our financial targets and building a foundation that sets us up to continue to achieve our goals and capitalize on the tremendous opportunity ahead. I remain confident we have the right team, the right plan and solutions to deliver meaningful value to our customers and look forward to sharing our progress today. Now I am going to hand it over to Elena.

Thanks, Twilio Data & Applications delivered $125 million in revenue in Q2, up 12% year-over-year, with a non-GAAP gross margin of 81.7%. During the quarter, we continued to execute against our plan to mature our sales organization, invest in new AI-powered products and capabilities, and expand our pipeline in an environment where buyers are facing increased budget scrutiny. I’m pleased with our progress to date, but we have more work ahead. Since last quarter, we’ve announced several exciting partnerships and new product capabilities that reflect our unique position in the market. In July, IDC ranked Segment as the number one CDP by worldwide market share in 2021. We recently announced a partnership with Databricks to develop a bi-directional integration that will help Segment customers unlock even more value from their data. Additionally, we are partnering with Google to bring generative AI into Flex and transform how brands personalize their customer interactions. Finally, we unveiled CustomerAI, infusing generative and predictive AI capabilities into Segment, Engage, Flex, and Communications. Our Signal conference is two weeks away, and we plan to showcase new innovation and an exciting roadmap built around our CustomerAI vision. Our software products are resonating in the market as evidenced by multiple notable customer wins this quarter. A long-standing Communications customer that provides software solutions to health and wellness providers signed a deal in Q2 with Segment CDP to deliver personalized customer experiences, increase trial-to-paid subscription rates, and drive improved patient outcomes. Follett, a leading provider of education technology, will leverage our entire suite of Segment products, including Connections, Protocols, Audiences, Journeys, and Unify. We won this competitive deal because of Segment’s faster time-to-value and ease of use for the customer. Fortune Media, a multinational media company, was a competitive win due to the flexibility of Segment Connections and the power of our Profile API, allowing Fortune Media to obtain a single view of their end-users, furthering the ability to personalize and improve the overall engagement experience. A large financial services company based in Israel committed to a comprehensive contact center solution leveraging Flex and our Conversations API for a custom-built AI chatbot with seamless agent handoff, allowing them to scale while improving the customer experience. A Fortune 100 property and casualty insurance provider that we signed an eight-figure deal with in Q3’22 scaled to over 15,000 agents during the quarter by leveraging new capabilities in Flex, allowing for enterprise scale. This Flex scale initiative, which was launched in limited availability in February, allows Flex to support customers scaling up to 30,000 agents concurrently in a single account. As I mentioned last quarter, we’ve made good progress with our transition to a dedicated sales model for Segment and Flex, and have rebuilt a specialized sales motion with highly skilled reps. Training and enablement was a key focus area for Q2, and we delivered increased in-person training sessions and improved overall sales capacity across the board. I’m excited that for the first time in over a year, the majority of our Segment sales team has been in-seat for at least nine months. We’ve seen early signs of traction with these efforts, including a strong increase in pipeline generation within Flex and significant improvement in Segment pipeline conversion from Q1. While I’m encouraged by our progress and some of these early signals, we continue to navigate a challenging macro environment, which has led to some instances of higher renewal contraction and lower expansion. Competitive churn has remained low and stable, but we are seeing instances of greater price sensitivity with some of our SMB customers. To address this, we are implementing initiatives designed to give customers, particularly small and mid-sized businesses, more flexibility to start small, deploy quickly, and expand to leverage more Segment capabilities as their business grows. We feel good about the steps we’ve made to improve execution, but there is still more work ahead to get our Data & Applications performance back to where we believe it should be. Going forward, we’ll continue to focus on onboarding and ramping our teams, optimizing our marketing campaigns, and driving more top-of-funnel activity. We’ll also focus on giving our customers more accessible entry points to our products and delivering faster time to value. We believe we’re laying a solid foundation for long-term growth for the business, and I’m confident that this will lead to improved bookings towards the back end of the year. With that, I am going to turn it over to Khozema.

Thank you, Elena. Twilio Communications delivered $913 million in revenue in Q2, up 10% year-over-year, with a non-GAAP gross margin of 48.2%. As a team, we continue to focus on driving growth with a more streamlined cost structure and generating meaningful profits. I’m pleased with our team’s ability to quickly adapt to the organizational changes we made earlier this year, which is evidenced by the results we delivered in Q2. Once again, Twilio was named a leader in IDC’s recent 2023 CPaaS MarketScape report. Leveraging this leadership position, our go-to-market team has been focused on proactively driving cross-sell opportunities across our broad portfolio of Communications products, and we’re seeing meaningful traction. As an example, last quarter we highlighted our largest email deal in Twilio history, and this quarter we signed our largest messaging deal ever with the same leading marketing automation company, bringing their total commitment to Twilio to more than $100 million. Additionally, a Fortune 500 entertainment customer that has been using our messaging, account security, and voice APIs recently chose Twilio to exclusively power a critical customer onboarding initiative, increasing their ongoing messaging spend with Twilio by $1 million a month. We continue to see an exciting runway for efficient growth in our Communications business against a $50+ billion total addressable market, and we believe our innovations in AI can help accelerate market share gains in the coming years. We are bringing AI/ML capabilities to life in our core Communications products, including the release of Fraud Guard for Verify. In Q2, we signed an expansion deal with a leading employment company to enhance their multi-channel, high-touch customer relationship model via our messaging, voice, and email APIs. Fraud Guard was an instrumental component of this deal. We also piloted SMS Pumping Protection in the second quarter, which leverages AI to automatically detect and block artificially inflated SMS traffic via our messaging API. This product prevented meaningful losses on behalf of our pilot customers, and as a result of the successful pilot, we’ve recently moved it into private beta. We also released Twilio Voice Intelligence into public beta, an AI-powered capability allowing our customers to extract data insights from their call recordings, unlocking process automation and data-driven decision-making at scale. A global financial services institution and a longstanding Programmable Voice customer is one of our first major customers to adopt this product. Leveraging Voice Intelligence has proven to continually increase the quality of their customer service and ensure robust compliance. We’re also continuing to focus on our sales-assisted product-led growth motion, and in Q2, we made great strides in returning to our self-service roots. During the quarter, we rolled out several updates to drive greater pricing transparency. We also implemented a decentralized solutions engineering team, removed layers of leadership and specialist teams, and arranged our international go-to-market team to be centrally managed. We are thoughtfully deploying our go-to-market resources to spend time on our largest existing and prospective customers to drive greater efficiencies and customer wins in the coming quarters. We are encouraged by our growth trajectory in Q2, but still see a choppy macro environment, which also means we have less visibility in this environment. We’re seeing volume growth across a number of our verticals, but we are still experiencing volume weakness in a few verticals, including Social & Messaging and Crypto. On balance, we remain hopeful about Q3 and beyond, and believe we have a good setup to continue to drive operating leverage and growth moving forward with a much more efficient go-to-market model. It’s worth noting that we have made a commitment to our carrier partners to block unregistered U.S.-bound 10DLC SMS and MMS traffic as of August 31, 2023. We expect this will have a modest negative impact on revenue growth in Q3 of up to 100 basis points, and it could yield a potential headwind of 200 to 300 basis points on growth in Q4. While the majority of our traffic is already registered, we are actively working with customers who are not yet compliant to get their traffic registered in advance of the deadline. I’m excited by the progress we made during the first half of the year as the team successfully navigated the operational and organizational changes we implemented, together with a challenging external environment. We’re executing well, and as volume stabilization continues, we believe we’re in a strong position to leverage our scale, large customer base, and leading set of Communications products to continue to win new business everywhere we can while driving further efficiencies, and we are confident revenue growth will reaccelerate over time. With that, I will turn it over to Aidan to discuss our financials.

Thank you, Khozema. We continue to execute on our plans to drive greater efficiencies across our business and establish an accelerated path to profitability. We’ve made solid progress against our targets, delivering record quarterly non-GAAP income from operations in Q2 and continuing on our path towards GAAP profitability. While we have more to accomplish, I’m pleased with the traction we’ve achieved to date and the results our team delivered in the quarter. Second quarter revenue was $1.038 billion, up 10% year-over-year on both a reported and organic basis. Communications revenue was $913 million, up 10% year-over-year; Data & Applications revenue was $125 million, up 12% year-over-year; and IoT and ValueFirst revenue was $25 million and is included in our Communications revenue for Q2; adjusting for these recent divestitures, total Q2 revenue would have been $1.013 million, up 11% year-over-year. While the market remains dynamic, we saw continued stabilization of volumes across our usage-based products throughout the quarter, which helped drive our revenue beat. As we referenced during our Q1 earnings call, our Q2 revenue growth rate was negatively impacted by headwinds from customers in the crypto industry. Total Q2 organic revenue growth excluding crypto customers was 14% year-over-year. We anticipate similar headwinds in Q3, after which the impact will start to moderate. Our Q2 Dollar-Based Net Expansion Rate was 103%. This is directly correlated to the overall growth trends we’re experiencing across the business. Dollar-based net expansion rates for the Communications and Data & Applications business units were 103% and 99%, respectively. Q2 non-GAAP gross profit grew 13% year-over-year, representing a non-GAAP gross margin of 52.2%. This is up 130 basis points year-over-year and down 10 basis points quarter-over-quarter, driven predominantly by product mix. Non-GAAP gross margins for our Communications and Data & Applications business were 48.2% and 81.7%, respectively. Q2 non-GAAP income from operations was $120 million, representing a non-GAAP operating margin of 11.6%. This was significantly ahead of expectations, primarily due to the revenue beat and our ongoing efforts to maintain cost discipline across the business. Q2 GAAP loss from operations was $142 million, which includes expenses associated with the February restructuring action, a loss associated with our ValueFirst divestiture, and real estate impairment charges, all-in totaling $55 million. Stock-based compensation as a percentage of revenue was 14.7% in Q2 excluding approximately $3 million of restructuring costs, down 120 basis points quarter-over-quarter. Lastly, for Q2 we generated $72 million in free cash flow, and this is an area of focus for us as we drive greater profitability in the business. We’re delivering against the plans that we outlined in February, and the progress that we demonstrated in Q2 shows that the changes we’ve made in the business are yielding the intended efficiency gains and profitability results. We’ve also continued to execute against our $1 billion share repurchase program that we commenced in February. We completed the first $500 million of new repurchases in early July, ahead of our original six-month target. We intend to continue to make progress against the balance of our share repurchase authorization moving forward. While we feel confident about the strength of our competitive positioning and market opportunity, we’re continuing to plan and run the business prudently given the dynamic external environment. For Q3 guidance, we’re initiating a revenue target of $980 million to $990 million, representing year-over-year reported revenue growth of 0% to 1% and 3% to 4% on an organic basis. The organic growth rate excludes our ValueFirst and IoT businesses, both of which were recently divested. Also, as mentioned above, these growth rates reflect a few hundred basis point headwind from crypto customers, as well as the potential one hundred basis point headwind associated with 10 DLC registration changes that Khozema highlighted. We expect Q3 non-GAAP income from operations of $75 million to $85 million. This takes into account approximately $10 million of expenses for our SIGNAL Conference, which will take place this month. Given our strong first half performance, we're raising our full-year non-GAAP income from operations guidance to $350 million to $400 million. We’ve made meaningful progress over the first half of the year, but there is still more work to be done. I’m confident that we are taking the right set of actions that will enable us to continue to drive focused execution and deliver increased value to our shareholders in the quarters to come. With that, I'll hand it back to Jeff for some final remarks before we transition to Q&A.

Thank you, Aidan and team. I just wanted to close by reminding folks if you haven't already heard enough of our prepared remarks, that indeed, our annual SIGNAL Conference is coming up on August 23rd. And CustomerAI, which we presented in June, is going to be taking center stage, and I'm really excited to be sharing the product details behind CustomerAI at Signal. CustomerAI, the set of capabilities that it brings, will help bring together our leading communications platform and our leading customer data platform with AI in the middle. So I can't wait to see how customer engagement will evolve with CustomerAI. And with that, why don't we turn it over to your questions.

Thank you. We'll start with Meta Marshall from Morgan Stanley.

Great. Thanks. And Jeff, you may have just alluded to this, but we'll hear more at Signal. But I just wanted to get a sense of how the increase in AI visibility or capability has changed the roadmap for Twilio? And just where are customers and the knowledge of how they want to actually approach some of these AI projects? Are they to the point where they know what they want to implement? Or is it still kind of an education phase? Thanks.

Yes. Thanks for the question, Meta. I talk to a lot of customers. And what I find is that customers are still very much in a learning mode and planning for the future mode, but not necessarily in deploying things actively for most. And so I think it's a really constructive conversation. When I look at CustomerAI and what we can do with artificial intelligence, I think this is the glue that brings together segments and Twilio communications into this one, customer engagement platform that we've been talking about for quite a while. And I think AI is arriving even sooner than we thought in terms of generative AI to bring a lot of those benefits to the table. We're already seeing the benefits of AI in a bunch of areas, whether it's Verify with our new broadband product, or in some of our compliance on authentication products. But I think this isn't even the first inning; this is like still doing warm-up pitches in terms of the AI game here. And so we're really excited, though, to bring some new products to market as well as to really speak with much more detail about the vision for CustomerAI at Signal, but I think this is a massive accelerator and our ability to deliver value between data and communications and can become a great tailwind in the company.

Yes. Hi. Thanks so much for taking my question. Maybe just on the data and apps part of the story. So if I'm trying to bridge the gross margins were down 250 basis points year-over-year, and then you reported a net revenue retention rate of 99% in that segment. So I know you talked about some greater renewal contraction and some price sensitivities. But just as we look ahead, can you see, I guess, more risk to the gross margins in that segment? And then just in terms of the top line, when we think about the 12% growth you just reported, that's still well above the 99% NRR. So any direction or color you can just give in terms of how you see that business progressing throughout the year? And if there could be a trough in the level of growth that we could see. Thanks so much.

Why don't I start, Taylor. This is Aidan. I'll go through gross margins, and then I'll hand it over to Aidan to talk about DB&E and revenue growth. So you're right that TD&A margins were down year-over-year. That was actually primarily driven by accounting and, in particular, accounting for capitalized software. So the initial capitalized software balance following the acquisition of Segment was written off. And that's typical post-acquisition. That boosted the gross margins in the 2021 and 2022 period. And as product development and innovation have been ongoing post-acquisition, that balance is building back up to a more normalized level. Now that we're kind of three years post-acquisition, that should start to normalize, but that's really what's driving the year-over-year decline. The business is still obviously very high margin at 82%. And there will always be pluses and minuses period-to-period, but we feel pretty good about that gross margin rate. We don't see anything materially in the future. So why don't I hand it over to Elena with that. Sure. I'll hit a couple of comments on growth. Our current growth is really reflective of bookings that have happened in prior quarters. And we've talked over the last couple of quarters about a deceleration in booking performance, which is now coming to bear in the revenue line. We expect to see bookings improve this year as we work to make sure that we're breaking through during a tough economic climate. A couple of other things impacting growth are trending traction numbers that have been affecting us a little more than we anticipated. We have some segment customers that are rightsizing their spend, mostly as their own businesses have contracted over time. We see some instances of sensitivity, particularly in the SMB space where those customers at times have had some viability issues. And so all of that together has led to some good traction in our bookings performance and increased customer contraction and churn, though not competitive. But it's sort of a signal of what's happening in the market. Our growth has been moderated here in the near term. I want to reiterate that we do expect bookings to continue to improve as that team comes online and we break through the tough macro environment. That revenue performance will follow into next year.

Yes. Thank you very much. So Khozema, just given that the messaging business is usage-based, and therefore, it is macro-sensitive, as you noted. Can you just comment on the stability that you're seeing there? Specifically, I'm just wondering, should we read that as stabilizing around 10% year-over-year growth or stabilizing around $900 million in quarterly revenue? Or do you mean something else there? And then can you just comment on whether that trending continued to improve at all in June and July?

Yeah, Mark, good question. So maybe to start off with the first part. So what we see overall is that volumes have stabilized. And we're not trying to imply either of the things that you said - that we're going to turn in kind of regular 10% revenue growth quarters nor that we're going to see the business flatline. I'd say it's probably kind of closer to being in the middle of that. While we've seen volumes stabilize, we haven't necessarily seen them inflect up. I'm encouraged by the quarter that we just put up in Q2. I'd say across the board, we've generally seen that most of the sectors in which we operate have seen pretty good revenue and volume growth. There have been a couple of downs, which we called out in the prepared remarks. Notably, we have seen some contracting activity in messaging and social messaging. That said, if it had not been for those items, we would have seen a pretty decent growth in the quarter beyond where we ended up landing. I think we also called out some of the 10DLC dynamics that are coming up in Q3 and Q4. We think that's a good thing for the industry over the long term. But that's kind of how I would characterize it: Volumes have stabilized. We're not seeing them inflect quite up yet. But based on our execution against sales targets, we're very encouraged about how that translates into financial results.

Great. Thanks. Khozema, I'll stay with you and maybe kind of on that last topic around gross margins. Just wondering if you've made any notable changes around kind of incentives for sales teams or other business leaders to focus on driving gross margins? And I guess, whether you have or not, are there levers you can lean on to help drive more improvements in gross margins in the near to medium term?

Yeah. Hey, Derrick, the way that we've reoriented our sales compensation is basically to pay on a gross profit basis. Now there's one caveat to that: We're only going to take a gross profit deal if we can see that it hurdles and generates operating profit. So we're clearly not going to take a margin that ends up resulting in a bottom line loss. That is an important change that we made in the compensation plan for our reps. I wouldn't say necessarily that we're biasing the business, especially on the Communication side, to generate higher gross margin. I think we do have opportunities in terms of cross-sell, for example. I think there's a lot that we can do in terms of selling more voice or email as just as examples. We'll continue with that as part of the strategy. The idea is ensuring the unit economics of every one of these customers is solid, and as long as we can efficiently get incremental gross profit dollars, we'll do that in the future.

Hey, guys. This is Alex on for Matt. One for me on the international strategy. With the new SaaS-first strategy, what, if any, implications are there for the international business? And how do you expect international revenue to trend as a percentage of total revenue going forward?

What you mean by SaaS first. So I'll take a crack at this, and then if anyone else wants to jump in, they can. With respect to our Data and Applications business, we operate in a number of international markets. We haven't seen any significant change in the balance between U.S. versus international bookings growth, for example. We're committed to the markets that we serve, and we're not necessarily looking to open up into new markets in the very near term. We think there's an enormous total addressable market right here in our core markets. The good news is that there's demand across all our international markets. We see improvement in performance across each of those regions, and we're able to service those markets as well from a software perspective in terms of functionality, capability, and our standards on privacy and data protection. I don’t know if anyone else has anything else to add.

I'll just add on the communication side. I mean, we continue to see a lot of opportunity internationally. That has historically been a set of markets that we've been under-penetrated in from a communications perspective. There's a lot of additional growth potential. Many customers in those international markets are not being serviced by anyone, and so I think there's a lot of open territory to cover. In addition, the unit economics are good as well internationally. We think there's a lot of gross profit dollars out there to go and capture. Similar to Elena's sentiment, it's not that we have to open up in ten more markets. We want to be very cost-efficient about the way we do it, but we do see a lot of opportunity out there, and we're going to continue pursuing it.

Thank you for taking my question. Jeff or Elena, you mentioned a reacceleration in revenue for next year. Is that an aspiration, or does it pertain to a specific quarter? Regarding the Data and Apps business, do you anticipate growth in Q4 based on previous bookings commentary? Is there potential for reacceleration early next year? Additionally, how much revenue do you expect from products or initiatives to contribute to that next year? I have a quick follow-up.

So let me take a point here. Then if Jeff wants to add something on the AI side, he can do that as well. We're not committing to specific timelines on the reacceleration in terms of when in 2024, it happens. But the growth is always aspirational. We are definitely looking forward to that happening. But it will be reflective of bookings improvements that we see this year. That is tied to the rebuild we've been undergoing and the addition of our ramped sales reps. The bookings are happening now, particularly in the back half of this year as we get better traction, and that will translate into 2024 revenue. So I hope that's clear, but we're not doing a quarter-by-quarter view.

And then I can speak to the AI part of your question. Look, Segment is the centerpiece of our CustomerAI strategy because that is where the proprietary data sets of our customers live; it is the sum of what they know about their customers and how they unlock the value in that data to personalize every touch point with their customers. Now with generative AI, you can do it much more efficiently and on an individualized basis, opening up tremendous new opportunities. Now that said, I think that AI as a monetization vector for the company is probably where you're seeing it across most companies, AI is in its earliest stages. Buyers are interested in hearing what we have to say and the products we're bringing to market, but those products are brand new because generative AI really started hitting a stride of utility in the last six months. And so no one has a mature product set. The whole market is in this journey. But from my conversations with our customers, they are liking our vision, and I think that can turn into sales of segments as companies prepare data for the incoming AI future. And that will be a key part of our selling value proposition going forward.