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Goodwill and Intangible Assets | 6 Months Ended
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Jun. 30, 2023
Goodwill and Intangible Assets Disclosure [Abstract] |
Goodwill and Intangible Assets | Goodwill and Intangible Assets Goodwill As described in Note 8, beginning in the second quarter of 2023, the Company concluded it had two operating and reportable segments. In connection with the shift from one operating and reportable segment to two operating and reportable segments, the Company reevaluated its reporting unit structure and determined that it had multiple reporting units. As such, during the second quarter of 2023, the Company reallocated goodwill to its newly formed reporting units. The Company estimates the fair value of its reporting units using a weighting of fair values derived from an income and a market approach. Estimating the fair value by these methods involves the use of a number of key assumptions including forecasted revenues and related growth rates, forecasted operating cash flows, the discount rate, and the selection of relevant market multiples of comparable publicly-traded companies with similar characteristics to the reporting unit. Under the income approach, the Company determined the fair value of a reporting unit based on the present value of estimated future cash flows. Cash flow projections are based on the Company’s best estimates of forecasted economic and market conditions over the period including growth rates and expected changes in operating cash flows. The discount rate used is based on a weighted average cost of capital adjusted for the relevant risk associated with the characteristics of the business and the projected cash flows. The market approach estimates fair value based on market multiples of current and forward 12-month revenue or adjusted EBITDA, as applicable, derived from comparable publicly traded companies with similar operating and investment characteristics as the reporting unit. While these assumptions reflect management’s best estimates of future performance at the time, these estimates are inherently complex and uncertain and the Company’s actual results could differ materially from these estimates. In connection with the goodwill reallocation, the Company assessed goodwill for impairment immediately before and immediately after the change in the reporting unit structure and related goodwill reallocation. Both assessments concluded that the fair value of the reporting units were above their respective carrying amounts. The following table presents the goodwill allocated to the Company’s reportable segments as of June 30, 2023, and December 31, 2022, and the changes during the period:
|  | Twilio Communications |  | Twilio Data & Applications |  | Total
|  | (In thousands)
Balance as of December 31, 2022 |  | $ | — |  |  | $ | — |  |  | $ | 5,284,153 |
Foreign currency adjustments |  |  |  |  |  | 26
Reallocation to segments in the second quarter of 2023(1) |  | 4,321,130 |  |  | 963,049 |  |  | — |
Foreign currency adjustments |  | 251 |  | — |  |  | 251 |
Goodwill divested or included in disposal group(2) |  | (41,164) |  | — |  |  | (41,164)
Balance as of June 30, 2023 |  | $ | 4,280,217 |  |  | $ | 963,049 |  |  | $ | 5,243,266 |
____________________________________ (1) Represents reallocation of goodwill as a result of changes in segment structure in the second quarter of 2023. (2) Represents goodwill related to the assets held for sale of the ValueFirst business and the divestiture of IoT. See Note 5 for further details. Intangible assets Intangible assets consisted of the following:
|  | As of June 30, 2023
|  | Cost |  | Accumulated Amortization |  | Net
Amortizable intangible assets: |  | (In thousands)
Developed technology |  | $ | 782,519 |  |  | $ | (385,161) |  |  | $ | 397,358 |
Customer relationships |  | 523,664 |  |  | (234,647) |  |  | 289,017 |
Supplier relationships |  | 49,756 |  |  | (21,776) |  |  | 27,980 |
Trade names |  | 25,968 |  |  | (21,060) |  |  | 4,908 |
Order backlog |  | 10,000 |  |  | (10,000) |  |  | — |
Patent |  | 3,969 |  |  | (803) |  |  | 3,166 |
Total amortizable intangible assets |  | 1,395,876 |  |  | (673,447) |  |  | 722,429 |
Non-amortizable intangible assets: |  |  |  |  |  |
Telecommunication licenses |  | 4,920 |  |  | — |  |  | 4,920 |
Trademarks and other |  | 295 |  |  | — |  |  | 295 |
Total |  | $ | 1,401,091 |  |  | $ | (673,447) |  |  | $ | 727,644 |
|  | As of December 31, 2022 |  |
|  | Cost |  | Accumulated Amortization |  | Net |  |
Amortizable intangible assets: |  | (In thousands) |  |
Developed technology |  | $ | 795,753 |  |  | $ | (335,893) |  |  | $ | 459,860 |  |  |
Customer relationships |  | 538,466 |  |  | (204,241) |  |  | 334,225 |  |  |
Supplier relationships |  | 56,922 |  |  | (19,846) |  |  | 37,076 |  |  |
Trade names |  | 30,342 |  |  | (20,106) |  |  | 10,236 |  |  |
Order backlog |  | 10,000 |  |  | (10,000) |  |  | — |  |  |
Patent |  | 4,028 |  |  | (705) |  |  | 3,323 |  |  |
Total amortizable intangible assets |  | 1,435,511 |  |  | (590,791) |  |  | 844,720 |  |  |
Non-amortizable intangible assets: |  |  |  |  |  |  |  |
Telecommunication licenses |  | 4,920 |  |  | — |  |  | 4,920 |  |  |
Trademarks and other |  | 295 |  |  | — |  |  | 295 |  |  |
Total |  | $ | 1,440,726 |  |  | $ | (590,791) |  |  | $ | 849,935 |  |  |
Amortization expense was $50.2 million and $52.2 million for the three months ended June 30, 2023 and 2022, respectively, and $101.1 million and $103.7 million for the six months ended June 30, 2023 and 2022, respectively. Total estimated future amortization expense is as follows:
|  | As of June 30, 2023
Year Ended December 31, |  | (In thousands)
2023 |  | $ | 97,845 |
2024 |  | 191,486 |
2025 |  | 187,912 |
2026 |  | 117,416 |
2027 |  | 69,871 |
Thereafter |  | 57,899 |
Total |  | $ | 722,429 |

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