Restructuring Activities

3 Months Ended

Mar. 31, 2023

Restructuring and Related Activities [Abstract]

Restructuring ActivitiesOn February 13, 2023, the Company committed to a workforce reduction plan (the “February 2023 Plan”) that eliminated approximately 17% of the Company’s workforce. In the three months ended March 31, 2023, the Company recorded restructuring charges of $121.9 million, which consisted of $111.6 million related to employee severances, benefits and facilitation costs and $10.3 million related to vesting of stock-based awards of the impacted employees. The execution of the February 2023 Plan was substantially completed as of March 31, 2023. The estimated remaining expenses related to the February 2023 Plan are approximately $20.0 million and are expected to be incurred in 2023. The actual expenses may differ materially from the original estimates.

The following table summarizes the Company’s restructuring liability related to the February 2023 Plan that is included in accrued expenses and other current liabilities in the accompanying condensed consolidated balance sheet:


	Workforce Reduction Costs		Facilitation Costs		Total
	(In thousands)
Balance as of December 31, 2022	$	—	$	—	$	—
Restructuring charges	105,113		6,455		111,568
Cash payments	(77,873)		(539)		(78,412)
Balance as of March 31, 2023	$	27,240	$	5,916	$	33,156

The $10.3 million vesting of the stock-based awards is recorded in the additional-paid-in capital in the accompanying condensed consolidated statement of stockholders’ equity.

The activity and the remaining amounts related to the restructuring plan effected in September 2022 (the “September 2022 Plan”) were insignificant.

Reorganization and Segment Reporting

In February 2023, concurrent with the announcement of the February 2023 Plan, the Company announced a reorganization of its business into two business units, Twilio Data & Applications and Twilio Communications, to enable the Company to better execute on the key priorities for each side of its business—accelerating growth for Twilio Data & Applications and driving efficiencies for Twilio Communications—while accounting for each business unit’s unique economic, customer and product needs (the “Reorganization”). Effective March 1, 2023, the Company’s Board of Directors appointed a president for each newly created business unit. Both presidents report directly to the Chief Operating Decision Maker (“CODM”), maintain regular contact with the CODM and are directly accountable for specific activities and financial results of their respective business units. The Company’s Chief Executive Officer is its CODM.

An operating segment is a component of a public entity that has all of the following characteristics:

–it engages in business activities from which it may recognize revenues and incur expenses,

–its operating results are regularly reviewed by the public entity’s CODM to make decisions about resources to be allocated to the segment and assess its performance, and

–its discrete financial information is available.

With the Reorganization, the Company significantly changed the organizational structure of its business, including the way management will operate the business in the future. As such, in February 2023, the Company began making significant realignments to its internal processes and controls to build a financial reporting process within its enterprise reporting system that would enable consistent, comparable and reliable internal reporting of discrete financial information on a newly formed business unit level (the “Realignment”). The Realignment includes efforts, such as remapping of the Company’s functional cost centers to the newly formed business units, developing new allocation methodologies for various costs and reserves, redesigning employee compensation structure, including commissions plans, and other changes - most of which involve judgment and assumptions. Additionally, as of March 31, 2023, the Company was still in process of determining the optimal measure of profitability to be used by the CODM to assess performance of the newly formed business units. The Company expects to complete these efforts during 2023 in order to regularly provide the CODM with discrete financial information on the business unit level, which will also enable the Company to provide segment level disclosures. As this information was not yet available as of March 31, 2023, the Company concluded that it continued to have one operating and reportable segment in the first quarter of 2023.

In connection with the expected shift from one operating segment to two operating segments in 2023, the Company will also shift into a multiple reporting unit structure. Once this occurs and the Company is able to allocate goodwill to each reporting unit, the Company will perform an impairment assessment for each newly formed reporting unit, which may result in goodwill and other asset impairments that could be material.