It’ll just take a little bit of time for that to show up in some of the growth numbers. In terms of mix, I wouldn’t say that there’s like anything significant happening in mix other than what we’ve already talked about in terms of, as international weakens a little bit and you see strength in domestic, that’s obviously going to have an impact on gross margins. But I think as it relates to more personalized messaging over time, I think that is certainly our expectation, especially as we pull in Segment into more of our Communications workloads. I think we’re already starting to see examples of that with customers wanting to deliver much more personalized Communications using data. I think you’ll see more of that through some of the products that we kind of called off.
I think Agent Copilot with Unified Profiles is one, but Voice Intelligence, which we’ve been kind of using within the confines of Voice itself is another. And I think increasingly you’ll start to see a lot more personalized communications. I think that’s the way that Generative AI is really going to accelerate our business and some of the impacts that we see with customers fundamentally to reduce costs and generate better outcomes.
Alex Zukin: Makes sense. And then on the OpEx side, obviously some kind of moving pieces here in Q1 and Q2, but where do we — as you guys think about kind of the balance of both getting the most leverage out of the model and where are you actually hiring and investing incremental dollars, how should we think about the hiring targets for kind of the next kind of incremental year or two quarters?
Khozema Shipchandler: Yeah, I can kind of take the question more generally. I think that we don’t feel like we have significant headcount needs right now. I mean, obviously, we go through kind of the normal process of backfilling and stuff like that, but we’re not looking to do any material ads. I’d say that our priorities right now have been around R&D and just kind of replenishing the pipeline there. We have a number of really focused projects in both Communications and Segment that we do expect to bear fruit over sort of the medium to long term. And I think that over time, those will start to show up in some of the growth numbers. I think other than that, I wouldn’t really expect anything around OpEx other than what we’ve called out in the past, which is, we’ve got this bonus program that we’ve obviously rolled out across the business that’s kind of a near-term impact in OpEx, but I think you understand the dynamics there and the way that that impacts stock-based compensation over time.
But otherwise, I think we feel pretty good with the cost bases that we’ve already got. And I think just one last thing maybe I’ll add is, we still see opportunity in terms of like geo-diversification of the roles that we’re hiring. And then I think the last one is like automation, right? We’re obviously doing a lot with automation for our customers, and we would expect that a lot of those same workloads that we’re offering externally should have positive benefits to the Twilio as well.
Alex Zukin: Perfect. Very clear. Thank you, guys.
Khozema Shipchandler: Thanks.
Operator: Thank you. One moment please for our next question. And our next question comes from the line of Ryan Koontz with Needham & Company.
Ryan Koontz: Thanks for the question. I wanted to follow up, if I could, on Alex’s last question there about the competitive dynamic. And how would you explain kind of what’s happening with registered and unregistered messages these days? I know you were a leader certainly in driving toward that. And how is that impacting the competitive landscape today? And is there any — what’s also your perspective, I guess, on the opportunity around political messaging as it relates to the election coming up? Thank you.
Khozema Shipchandler: Yeah, a couple of questions in there, Ryan. So let me take the political one first. So, I think in 2024, generally, obviously, we’re in the middle of an election season cycle, we’ll generate some revenue from political customers, but we don’t really anticipate an expected outsized impact as a result of the race. Just as a reminder, we have registration requirements and an acceptable use policy in place that we expect all of our customers to follow, especially as it relates to opt-ins. And that really just sort of ensures the quality of traffic on our network and protects consumers. And so, we’re not going to accept any business where that policy is not being properly followed during this upcoming cycle.
And we think that’s in the best long-term interests of the business and the best long-term interests of certainly the American consumer, but that has actually global implications as well because we’re taking kind of the same stance in most markets. That’s kind of a good segue to the dynamic that you asked in the first part of your question. The whole 10DLC thing is entirely behind us. We went through that process last year. I think we felt a very small impact as a result of that. And so, I don’t think that there’ll be really any impact as a result. And toll-free is kind of a non-issue as well because that got done at that point as well. And then finally, just in terms of competitive dynamics, like, I don’t really think it alters anything other than the feedback that we receive from our customers is that A, they want to work with a trusted provider.
And so we think that we benefit from using compliance not just as sort of our regulatory posture, but actually as a unique selling point of the business. And B, I think increasingly, they want to work with someone who doesn’t just prosecute that traffic in that fashion, but also ensures that no fraud or anything of that nature is being committed as well, which is where our AI tools and the like can really play a role in helping our customers with their traffic and ensuring that it’s clean.
Ryan Koontz: That’s really great, Khozema. Thank you. Just a real quick follow-up, on the A and B side, is that relatively stable now or are those still inching up?
Khozema Shipchandler: I’d say it’s relatively stable at this stage. There’s nothing kind of new to talk about since I don’t know, a couple of years ago, I guess.
Ryan Koontz: Okay. Got it. Super. Thank you.
Khozema Shipchandler: Thanks.
Operator: Thank you. One moment please for our next question. And our next question comes from the line of Samad Samana with Jefferies.
Billy Fitzsimmons: Awesome. Thank you. This is actually Billy Fitzsimmons on for Samad. I’ll keep it pretty quick. Intra-quarter, you gave an organic growth target range and then reaffirmed it today. Can you just remind us what that growth range kind of assumes in terms of macro dynamics as we progress through the year? Thank you.
Aidan Viggiano: Yeah. So, we’ve seen relatively stable volumes, Billy, as we’ve talked about. I’d say, as you think about kind of the range of outcomes between the low end of the range and the higher end of the range, I’d say volumes, if we didn’t see any erosion kind of overall in volume, I would say that would kind of get you to the lower end of the range. Conversely, if we started to see volumes inflect off and we continue to execute on our cross-sell initiatives and expansion with ISVs and the different initiatives that we’re working on, we could see volume and revenue at the higher end of the range. What I would say is, and I said this before, but regardless of where we are in the range, we’re going to deliver on the profit and free cash flow. We’re very intense and focused on that. We were kind of very zeroed in regardless of where we land on the revenue range.
Billy Fitzsimmons: Understood. Thank you very much.
Operator: Thank you. One moment please for our next question. And our next question comes from the line of Michael Turrin with Wells Fargo.
Michael Turrin: Hey, thanks. I appreciate you taking the questions. Just on the Communications customer metric, that has ticked down a bit from Q3 to Q4 and picked back up in Q1. So, I’m just curious if any of that is definitional just tied to the splitting of Segment or if that is a return to — just to bounce back in customer activity on the core Communications segment?
Aidan Viggiano: No, it’s not definitional. It is — I would say it’s a bounce back given the two options that you gave me there. What I would just say overall is that this metric represents — it’s anchored to a minimum $5 monthly revenue spend. And so we have a large number of active customer accounts with relatively low individual spend that in aggregate do not drive like a significant portion of the revenue. So, it is nothing to do with definitional. It’s a bounce back, I guess, in terms of the customer account. But I would just say the relative importance of this metric given the size and the scale of the business at this point and we’re talking about a $5 threshold, I don’t think it’s probably the most relevant metric today, just given the size of the business and how much we’ve grown.
Michael Turrin: And on Segment, just how should we think about the timeline to get that piece of the business to a good foundational cost base to restart from? Obviously, there had been an evaluation period. So now going forward, how should we think about the timeline of where you’ve gotten to at least sort of a good foundational restarting point, if you will?
Aidan Viggiano: From a cost perspective, Michael?
Michael Turrin: I think so. Yeah. I mean, just when you feel like that — I mean, obviously, there are some moving pieces there, but when you feel like the sort of the foundation is in place, so at least the initial efforts in rebuilding that business.
Aidan Viggiano: So, why don’t I start with the cost side and then Khozema can talk more around all the actions that we’re taking. What I would say is, the business lost $21 million in the first quarter. That was actually up a little bit versus the fourth quarter. We have a path to get that business to breakeven by the second quarter of next year. What I would say is, we don’t expect this to be completely linear, right? We have a number of initiatives that we’re working on. Khozema talked about the product from a product perspective, getting the data, warehousing, or operability. There’s a number of things we’re working on with regards to time to value. So, we intend to incur some costs to deliver on those objectives, but we will get to breakeven by Q2 of 2025. It just — that decline to Q2 2025 won’t necessarily be linear. So, we have plans in place, but I just wanted to put that out there so you know how to think about that and model it.
Khozema Shipchandler: Yeah, the only thing I would add there, Michael, is that this management team has been quite good about meeting targets that we set out for ourselves and nothing’s changed about our ability and confidence in being able to get to non-GAAP breakeven by Q2 2025 of next year. In the meantime, there are a number of other things that we also committed to that were more operational in nature, data warehouse interoperability, delivering a combined Segment Twilio offering, making sure that we had a number of additional things like that on our roadmap upcoming, improving our time to value, and, again, each of those operational areas, we’re actually making quite good progress. And again, as you alluded to, there are some dynamics here in terms of both revenue and cost and some of the revenue dynamics are going to just take a little bit of time given the nature of how bookings have to kind of catch up but we are seeing green shoots, we are seeing interesting new customers and I think as we continue to execute on the operational items that are important to the future of the business, I think we feel increasingly confident that Segment is a really important asset to Twilio, that data is going to play a really critical role in terms of the way that we’re going to deliver customer outcomes and I think you saw the first one of those with this Agent Copilot that we released using Segment and Comms in Q1.
Michael Turrin: Thank you, both.
Operator: Thank you. One moment please for our next question. And our next question comes from the line of Ryan MacWilliams with Barclays.
Pete Newton: Hey, thanks for taking my question. This is Pete Newton on for Ryan MacWilliams. Just a question on the sales side. How has sales efficiency and rep execution trended recently? Is this efficiency level in line with internal [Technical Difficulty]
Aidan Viggiano: You have a little bit of a bad connection. Can you try again?
Pete Newton: Is this better?
Aidan Viggiano: Yeah.
Pete Newton: Perfect. Yeah. Just a question on the sales side. How has sales efficiency trended recently? And is it in line with internal expectations? Maybe if you could delineate between sales efficiency on the Segment side versus the Communications side, just so we get a full picture.
Aidan Viggiano: Yeah. I think on the Communications side of the house, it’s in line with where we expected it to be. There’s — the team’s executing. We have reoriented that team to gross profit dollar generation. For the most part, I’d say probably 80% of the team is measured on that. And they’re performing kind of in line with expectations. On the Segment side, we are kind of in a bit of a rebuild here. I’d say bookings came in I would say a little later than we’d want them to be, like, longer-term in the Segment business in Q1. But the team has a number of actions in place, and Khozema has kind of talked about them several times now, so I won’t reiterate them. But it’s going to take a couple quarters for Thomas and the team to get that business back and humming to kind of where we want it to be, and it’ll take some time for that to show up in the financial metrics.
