Twilio Lays Off 930 Employees: 5 Big Things To Know

‘I take responsibility for choosing to grow our team faster and to pursue many priorities beyond these four priorities over the recent years. And now, I also own the decision to become more focused—resulting in this layoff,’ says CEO Jeff Lawson.

Who And Why: 5 Things Twilio Employees Should Know

Twilio is laying off nearly 1,000 employees as the cloud communications specialist says it simply grew too fast and needs to focus on profitability and core priorities.

However, some of the statements made by Twilio CEO and co-founded Jeff Lawson to its more than 8,500 employees this week have raised some eyebrows, including calling the layoffs a “wise” move.

“I’m not going to sugarcoat things. A layoff is the last thing we want to do, but I believe it’s wise and necessary,” said Lawson in a letter to employees.

Additionally, Lawson said his $3 billion company was “particularly focused” on making sure Twilio layoffs were “carried out through an Anti-Racist/Anti-Oppression lens.”

[Related: The 5 Biggest AWS Executive Departures In 2022]

Twilio CEO: ‘I Take Responsibility’

Lawson also admitted it was somewhat his fault Twilio was laying off approximately 11 percent of its global workforce because of his desire to grow the company too quickly and beyond its main priorities.

“I take responsibility for choosing to grow our team faster and to pursue many priorities beyond [Twilio’s] four priorities over the recent years. And now, I also own the decision to become more focused—resulting in this layoff,” said Lawson.

Lawson said Twilio’s four key priorities include investing in its platform reliability and trust, increasing profitability of messaging, accelerating Segment adoption and scaling its Flex customer base.

The San Francisco-based company has more than 275,000 active customer accounts as of June.

How Twilio Decided On Layoffs

On Monday, Twilio’s compensation and talent management committee of the board of directors approved a “restructuring plan” for the company, according to a filing with the U.S. Securities and Exchange Commission.

The restructuring plan, “is designed to reduce operating costs, improve operating margins and shift the company’s selling capacity to accelerate software sales,” said Twilio in its filing. “The Restructuring Plan includes elimination of approximately 11 percent of the company’s current workforce.”

On Wednesday, Twilio executives began notifying team members affected by the restructuring plan.

“Today, it’s okay to be a bit shocked and feel sad. And to support your colleagues,” said Lawson. “I am confident that we’ll look back at this as a difficult time – but one that set up Twilio well for the future.”

CRN reviewed several of Twilio’s filings with the U.S Securities and Exchange Commission. Here are the five key things you need to know about Twilio laying off 11 percent of its workforce.

Approximately 936 Twilio Employees To Be Let Go

As of June 30, 2022, Twilio had 8,510 employees, according to recent second quarter 2022 financial earnings release in August.

Twilio said it would lay off 11 percent of its workforce, meaning approximately 936 Twilio employees will be let go.

“I am deeply sorry to see you all leave Twilio,” said Lawson in his letter to employees. “You have all been part of building our company. You’ve been our teammates, partners, and friends. I’m grateful for your contributions to our customers and our business. And we owe it to you to help as much as we can.”

Lawson said the majority of affected employees will be able to remain on company payroll while searching for their next role, “whether it be inside or outside Twilio.”

Twilio’s talent acquisition team will provide services to impacted Twilio employees “if there’s an open internal role in one of our investment areas,” the CEO said.

“We will create a list that impacted employees can opt into, which we’ll share with other companies who may be hiring, as well as investors who know many such companies,” said Lawson.

Fired Employees Compensation; Upwards Of $70 Million In Cash Outlays

Twilio said the 11 percent reduction in its employee headcount will cost between $70 million and $90 million in charges.

This roughly $80 million cost figure consists of cash expenditures for employee transition, notice period and severance payments, employee benefits, and related facilitation costs, as well as non-cash expenditures related to vesting of share-based awards.

Of this amount, $55 million to $70 million is expected to result in future cash outlays.

All Twilio employees who are fired will receive “at least” 12 weeks of pay, plus one week for every year of service at Twilio.

“You’ll also receive the full value of Twilio’s next stock vest because the Twilions who are leaving us are shareholders too – which is important to us,” said Lawson in his a letter to employees.

Who Is Being Let Go?

Twilio employees who work in go-to-market, research and development, as well as general and administrative departments are most likely to get fired.

“By no fault of the Twilions impacted today, we’ve curtailed our investment in areas of Go To Market where customers can succeed without as much human intervention, as well as making targeted changes to be more efficient in areas of R&D and G&A,” Twilio’s CEO said.

Twilio said it applied a “rigorous selection process” to determine which roles were most tightly aligned to its four priorities of platform investment, increasing messaging profitability, accelerating Segment adoption, and scaling its Flex customer base.

Additionally, Lawson said Twilio is committed to becoming “an Anti-Racist/Anti-Oppression” company.

He said layoffs “like this” can have a more “pronounced impact on marginalized communities, so we were particularly focused on ensuring our layoffs – while a business necessity today – were carried out through an Anti-Racist/Anti-Oppression lens.”

Firings ‘May Extend’ Beyond 2022 In Certain Countries

Twilio said “the majority of the restructuring changes” will happen in its current third quarter of 2022.

The company is expecting the restructuring plan, including cash payments to employees, will be complete by the end of the year.

However, Twilio said employee eliminations outside the U.S. may extend beyond 2022.

“Potential position eliminations in each country are subject to local law and consultation requirements, which may extend this process beyond the fourth quarter of 2022 in certain countries,” said Twilio in an 8-K filing with the United States Securities and Exchange Commission.

Outside of America, Twilio operates in 20 other counties.

“Notifications and next steps will vary based on local laws and practices,” said Twilio’s CEO to employees on Wednesday. “Regardless, all Twilions whose roles are or may be impacted outside the US can expect an email or meeting invitation within the next two hours.”

Twilio Sales Exploding But Company Is Operating At A Net Loss

Although Twilio sales have been soaring over the past year—on pace to generate well over $3.5 billion in 2022—the company continues to operate at a net loss.

Twilio revenue jumped 41 percent year over year during its recent second quarter 2022, capturing $943 million in sales. During its first quarter, revenue increased 48 percent year over year to $875 million.

However, Twilio reported a total operating loss of $312 million in its second quarter 2022, compared to a loss of $202 million in second quarter 2021.

Twilio’s operating expenses for sales and marketing, and R&D grew significantly from second quarter 2021 to second quarter 2022.

In 2021, Twilio reported annual sales of $2.84 billion, but an operating net loss of $915 million.

In 2020, Twilio acquired customer data analytics specialist Segment for a whopping $3.2 billion and spent hundreds of millions on several other acquisitions since 2020.

In an SEC filing this week, Twilio provided financial guidance for its current third quarter.

Twilio expects to generate around $970 million in its third quarter, which would representing about 31 percent sales growth year over year. However, the company projects a total loss from operations of between $60 million to $70 million in the third quarter.

“We are builders. This is all part of the complicated, difficult and at times emotional journey as builders,” said Lawson to employees. “No doubt, it will be a hard few months as we change the shape of our company for the opportunity ahead.”

The publicly traded company currently has a market cap of over $14.3 billion.