Good day, and thank you for standing by. Welcome to the Twilio Q3 2021 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speakers presentation, there will be question and answer session. [Operator Instructions] Please be advised that today's conference is also being recorded. [Operator Instructions] Without a further ado, I would like to welcome one of your speakers for today, Mr. Andrew Zilli, Vice President of Investor Relations and Treasury. Sir, the floor is yours.

Thanks, [Carol] (ph). Good afternoon, everyone, and thank you for joining us for Twilio's Third Quarter 2021 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, George Hu, our outgoing COO, Marc Boroditsky, CRO, and Khozema Shipchandler, CFO. As a reminder, some of our commentary today maybe a non-GAAP term. Reconciliations between our GAAP and non-GAAP results and further information related to guidance can be found in our earnings press release. Additionally, some of our discussion and responses may contain forward-looking statements, which are subject to risks, uncertainties, and assumptions In particular, our expected business benefits and financial impacts from our acquisitions, particularly Segment and Zipwhip, and our partnerships and investments, including the associated transactions, the impact of recent and future pricing changes on certain third-party platforms on us and our customers, our outlook for the quarter ending December 31, 2021, our ability to achieve our targets for non-GAAP gross margin over time, an annual growth rate over the next 3 years, and our ability to manage changes in network service provider fees that we pay in connection with the delivery of our communication on our platform, and the impact of those fees on our gross margin, are subject to change. Should any of these risks materialize or should our assumptions prove to be incorrect, actual financial results could differ materially from our projections or those implied by these forward-looking statements A description of these risks, uncertainties, and assumptions, and other factors that could affect our financial results are included in our SEC filings, including our most recent report on Form 10-K and subsequent reports on Form 10-Q. And our remarks during today's discussion should be considered to incorporate this information by reference. Forward-looking statements represent our beliefs and assumptions only as of the date such statements are made. We undertake no obligation to update any forward-looking statements made during this call, to reflect events or circumstances after today, or to reflect new information, or the occurrence of unanticipated events, except as required by law. With that, I'll hand it over to Jeff for a brief statement, and then we'll open the call for Q&A.

Thanks, Zilli. Before we begin Q&A today, I want to take a moment to thank our COO George Hu for the amazing contributions he's made to Twilio over the past 5 years. With George's leadership, we really figured out a developer-first go-to-market, which is an incredibly challenging feat given nearly no other companies has a go-to market that's as unique or as efficient as ours. George has set us up on a new trajectory in building a tremendous team. Starting with his direct reports all the way down the go-to-market recommendation, and I can't wait to see what you build next, George. I am also incredibly excited for Marc Boroditsky to be taking the [charge] (ph) and continue driving our forward progress. Marc has built the Twilio sales teams from [literally] (ph) zero, to the powerhouse of challenge it is today, kept up the admiration and respect to the teams, and a vision for how to continually evolve and grow our go-to-market with developers, enterprises, partners, and digital leaders. I'm excited for the next chapter, Marc. Now, on to the questions.

Thank you, sir. [Operator Instructions]. Our first question comes from the line of Meta Marshall from Morgan Stanley. Please ask your question.

Great. I appreciate the question and congratulations on the quarter. Understanding you had a couple of 100 basis point headwind from political traffic that contributed to the deceleration in organic revenue growth we saw in Q3, but what do you think is the biggest contributor to the slowdown in organic growth, and what kind gives you that continued confidence that you can grow 30% the next three years, a number we kind of understood to be an organic number? Thanks.

Yeah. Hey Meta, this is Khozema. I would say, first of all, I mean at 38% organic, we feel great about our overall growth performance in the quarter. Obviously, we're at about 65% on an inorganic basis. If you just look at the rest of the growth across industries, across used cases, , across geographies, and across customers, we have a lot of confidence in the go-forward capabilities of the business. I would also add that we are really strong quarter performance for Segment and so when we put all those different pieces together, we definitely see our ability to continue growing at elevated levels for the foreseeable future and we feel really confident in our beliefs to deliver the 30% plus organic growth that we talked about last year, over the next 3 years.

Great. Thank you.

Our next question comes from the line of Fred Havemeyer from Macquarie. You may ask your question.

Thank you very much. Could you talk about your overall M&A philosophy? How do you approach that build versus buy versus partner debate at Twilio. And then, generally, when you're looking across the landscape, the market landscape, how do you think M&A appetite to progressing in the CPaaS market and in the customer engagement market?

I think, this is Jeff. I'll take the question. So first on your question on the M&A philosophy which is really remained unchanged in the history of the Company, which is what we've got our insights about the market, if [Indiscernible] going, and what our customers need from us. And as a result, we’ve a roadmap for the things that we want to accomplish our customers to unlock this vision of being the leading customer engagement platform, which I see as the greatest enterprise software opportunity of our time. When we look at the things that we're going to go build, whether it's the teams, we have to go higher or technology yet to build, if we see a team out there which is amazing or we see a product out there and that's really exactly what we might go do ourselves, then we might say, hey, we can achieve this vision faster by bringing that team or that product onboard and accelerating our ability to unlock [Indiscernible] and that's really how we've always looked at it, which is does it accelerate our ability to achieve our vision of becoming the leading customer engagement platform. And I think there is a second question?

Yeah, the second question there is just generally, how do you see the overall M&A appetite for Twilio in this market and generally across an entire CPaaS market? Certainly there's been quite a bit of M&A from other CPaaS vendors out there.

Hey, Fred, this is Khozema. I would say that -- we obviously have a really strong balance sheet and a lot of cash on it. I think the way that we look at it is exactly the way that Jeff described, which means we'll be opportunistic if an opportunity presents itself. I think we obviously have been acquisitive over the last several years. We did Segment, of course, last year, around this time and then we've done some assets in more of the messaging space since then. But it's not like we see something in front of us that we necessarily have to do. We want to be selective about the opportunities we obviously certainly see where valuations are today as well. But I think more than anything, we just feel great about technology stack that we've already got, we're really confident, especially coming off of a really strong SIGNAL conference.

Okay. Thank you.

Your next question comes from the line of Rishi Jaluria from RBC Capital Markets. Your line is open.

Hey, guys. This is Rishi Jaluria from RBC. Thanks so much for taking my question. It has always been great to work with you and then all the best to the next chapter and Khozema, congrats on the promotion or -- and new responsibilities. Just wanted to ask one question which is, from a macro perspective, seems like a really strong demand environment. But how should we think about the puts and takes of maybe some of the benefits that we saw from lockdowns last year potentially fading and maybe the return of travel and specifically business travel, especially given that most industries seem to still be having that put on hold. Just how are you thinking about stuff like that coming back? Thank you.

Hey, Rishi, this is Jeff. I'll answer. First of all, I agree with you. This is a strong environment for companies who are undergoing digital transformation and those transformations have been accelerated by the pandemic. And something that I think it's really important to understand here is that this is not like a restaurant or the digital interactions that got put in say over the course of the past year or two was not a deviation from the future [Indiscernible]. It was just an acceleration. We're bringing forward a lot of the innovation that were happening. Think about telemedicine. You thought telemedicine might take a decade [Indiscernible] adaption. And that is going to continue, I believe, to be the trend when I look at do you want to drive across town for every doctor's visit? No. Like you can see a doctor in 15 minutes on a video call may go back to work, that's a better experience. Same thing with like, for instance like curbside pickup around my ordering, and all these sort of things. This has been an acceleration of the natural digital transformation of the world. It's just going faster. When you see that environment exists, businesses are going to continue to drive those roadmaps because the competitive environment today, that customers get accustomed to these efficiencies and these experiences, and that creates even more demand for digital. So I think it's a flywheel for how customers are now differentiating themselves digitally in those markets, and our customer engagement platform now enables this. When you think about it, like I had talked last week at SIGNAL our big customer conference about how [Indiscernible] pandemic has accelerated, like so many companies, I think probably we talked to 250,000 customers in the digital acceleration, the topic of accelerating their…

Got it. Thank you.

Your next question is from the line of Samad Samana of Jefferies. Please ask your question.

Hi. Good evening. Thanks for taking my questions. Jeff, maybe one to kick off for you, and as you mentioned, the SIGNAL conference, the Company rolled out Engage, and you've rolled out the Frontline long before that. I'm just wondering if you're starting to see as you've rolled out more of these solutions on top of the core platform, if you're seeing any difference in the adoption on day 1 from customers, or if you're seeing going more bundling of the solutions upfront and how that's actually driving volume inside of the business as well?

And that's a great question for Marc, our Chief Revenue Officer to take.

Thank you Jeff and thank you Samad for the question. Definitely affecting the adoption that we have seen in the recent quarter. As an example, Flex has inspired our partners to consider building the next-generation of their offering for contact center on the Flex solution. Likewise, with the announcement of Engage, last week at SIGNAL I had a number of conversations with IFD that are looking at, again, changing their offering overall. Probably the one that aligns the most to your question, Samad, is the successively seen with our partner Waterfield who has built a plug-in for Flex and made it possible for us to sell into more of the market. And this past quarter, we saw small company that needed a full solution on day 1 as docking Flex as their first solutions from Twilio, which gives us great confidence about the potential that Flex represents from SMB all the way to [Indiscernible].

Okay, that's helpful. Khozema, I don't want to put you on the spot with a math question, but I appreciate it. I still have a follow-up. If I adjust for political revenue in the low 40s organic growth, one, I just want to see if that's correct. And then the guide implies, again, low 30s if you take out political revenue., How should we maybe contextualize that with that go-forward 30% plus growth as well as you look forward?

Thanks for the question, Samad, believe it or not, I actually tend to do a little bit of math on the fly. I think the setup that you gave is about right. I think we continue to see elevated growth across the businesses as we talked about earlier. The reality is that we gave 65% inorganic, 38% organic. I think if you do the math that you just implied, you're at about the ballpark that you just described. The guidance that we put out for Q4, we feel really good about -- we see a nice setup certainly for Q4. And as we look out based on the a lot of things that Marc just referenced a moment ago as well as some of the things that Jeff talked about relative to SIGNAL, I mean, we see a tremendous amount of opportunity in front of us and have a really, really strong conviction that we can deliver 30% plus over the next three years. So I think we just feel really, really good about broad-based strength across the business.

Great, I appreciate you all taking my questions. Thank you.

Sure. Thanks, Samad.

The next question is coming from the line of Derrick Wood of Cowen. You may now ask your question.

Thanks for taking my question. George, good luck in your next endeavor. Khozema, I know it's probably early, but anything you want to share in terms of what your early priorities will be as you move into the COO role? And then I -- you've had a new CRO for a year, Marc, I know you're on the call. Should we assume, from a direct sales, go-to-market standpoint we shouldn't anticipate too much change or should we be thinking about taking the time to make bigger tweaks to the model?

Maybe I'll go first, Derrick, and it's Khozema, and then I'll turn it over to Marc. So I think from my standpoint, in large part, the role is an expansion of additional [responsibility](ph). I see it more as a continuation of things that we've already been doing. I think in general, we want -- or I want to in the role to really help the operating team win as much as possible, as efficiently as possible, as fast as possible, integrate the infrastructure and support [Indiscernible] inside the Company so that all of our great teams inside the go-to market and engineering teams can innovate and then obviously distribute all the great products and services that we've got. So I don't think there is like really a sea change in the context of my role. I mean, I'm obviously super excited to take it on. Even more so, I'm humbled and privileged to be able to [Indiscernible]. I want to continue to help Jeff and manage [the team win] (ph). Marc?

Thanks Khozema and thank you, Derrick, for the question. A little background. I've been in Twilio now for seven years since the acquisition of [Indiscernible] and as Jeff referenced in his preamble, it was just a handful of sales reps at the time here at Twilio. And George joined five-years ago I had a great privilege to build out the go-to-market [Indiscernible] that he's been executing on since and as you identified Derrick, we're expecting to continue forward with the strategy that we have today. We've got a fantastic team in place. We're well-positioned to continue to execute against the already successful execution that we have with developers. We're continuing to progress our success in the enterprise, and we're expanding our overall international footprint. As I mentioned earlier as well, in the example that I gave, we're making great progress of our partner communities, engaging them to build out the business together.

That's helpful. If could follow up on the financial question back you, Khozema. Your gross margins have certainly been topical with investors, interesting slide you gave on the bridge to the A2P fees, but you can just take a second to really unpack that and what's been causing the pressure, how we should be thinking about gross margin in the next few quarters and what it's going to take to get to that 60% long-term target? Thanks.

Yes, thanks for the question, Derrick. I mean, I think the bridge with respect to the A2P fee dynamic at least is self-explanatory. If you can see that it [Indiscernible] almost [Indiscernible] relative to what we would otherwise have reported, were it not for those fees. I think more broadly, what we seen is honestly a fantastic problem, which is that our messaging business has been growing at really accelerated rates and we gave you some information last year, for example, during our Investor Day that basically illustrated the relative gross margins of our different products and services. So as the messaging business grows at this accelerated rate, it makes the margin rate down a little bit, which honestly is a trade that we're more than willing to take, given the fact that we are focused on gross profit dollar expansion so that we continue to invest in the business. In terms of the latter part of your question, and 60% plus, I mean, we still have a lot of conviction in that 60% plus longer term framework. And I think where that's going to come from is the accelerated growth that we're seeing in our application services category. And I think Segment is obviously the most recent example of that. I think the promise of engaging what we described it at a single conference last week, as well as the best that segment had a fantastic quarters sequentially coming off of Q2 into Q3. Just as a lot of confidence that that businesses performed well and continue to underpin a lot of different things that we want to do with the rest of the business. Obviously we're very excited about the progress of Flex 2. And so I think it's a combination of those things that need to continue to believe in that 50% for a long-term target.

Your next question comes from the line of Michael Turrin of Wells Fargo Securities. Your line is open.

Hey, there. Thanks. Good afternoon. I appreciate you taking the questions. George, I certainly wish you the best. I know from just a number of these calls, you've been instrumental in things like instrumenting the go-to-market and the partner initiatives there. Can you just maybe broadly as a team talk more about continuity just on the go-to-market side, given we're heading into the year-end? We can appreciate that Marc has been with you for some time, but maybe just adding additional context for investors and that evolution and just the confidence in sustaining the tremendous pace that the business has been able to perform at for a number of years now.

Thank you Michael. This is George. Thank you for the kind words. And then certainly, it seems difficult to be [Indiscernible] I'm so incredibly excited about Twilio and its future, I think especially coming off of an amazing signal here. I talk to so many customers that are just excited about this customer engaging platform vision and Segment. But what gives me confidence is, tremendously we should be up here. I've been working with Marc now for a number of years, 4 years. Marc, [Indiscernible] really felt this entire sales machines and the limited numbers quarter-after-quarter was an incredible year was higher, all re-challenge having the sales even. And I know that you could [Indiscernible] job going forward, I think there's going to be a continuity, and I think that Marc is also going to evolve the organization and forget to the next level also. I also, far less -- Marc [Indiscernible] I also want to really gradually and acknowledged Khozema who's going to be an amazing COO of Twilio. He's been an amazing partner to me, he's one of the smartest people I've ever worked with, a great leader and he's going to do phenomenal, phenomenal things for the next chapter in Twilio.

Thank you, George. And Michael thank you for your question. Right now, the expectations are very solid around the team and how we're going to be progressing into -- how we're going to be progressing with the plan that we got in place. This plan has not -- the set plan is -- developed over the last 5 years with George and I in [Indiscernible]. When George joined, he brought expertise that is very familiar to me from my previous enterprise experience and he supported us in building out a plan that allows us to reach to the enterprise from the models [Indiscernible] developed to self-serve and helped us to build out the overall global footprints and ultimately our partner initiative. All things that are implied at great stages of success. I am very confident for the team that's in place that we will continue that trajectory.

That's all very helpful. If I could just ask a follow-on to gross margins were actually -- I know you've gotten a couple of questions here, Khozema. They're actually slightly up. I think many investors are expecting that we might see just continued headwinds given the international business is now a third of overall. Are we at a point where for things like segment as if we're first starting to provide the counterbalance or anything else you'd call out and you also added a slide on just gross profit growth. So is that a metric maybe just to highlight in terms of just the conversations around these dynamics?

I would say the inclusion of the gross profit slide is a necessarily indication of anything new. We've been saying for a while now, Michael, that we've been focused on gross profit dollar expansion, obviously gives us lot of fuels to reinvest back in the business. We just thought it would be helpful in terms of fighting, position, color. Same thing goes for gross margin slide which is -- [Indiscernible] behind a story other than obviously the A2P [Indiscernible] closed on a little bit, and you could see that in the bridges that we provided. I think generally speaking, as I said earlier, like people grade about, "Problem that we have" that can -- We have this incredibly fast growth messaging business, which has make the overall gross margin of the Company down. But to your point, whether it's some of the newer acquisitions for Flex or Segment, we do have a number of things that can provide fuel for a gross margin up less over time. We're not just getting into that today per se, but we do have a lot of confidence in our long-term framework 60% plus over time.

Thank you.

Thanks, Michael.

The next question comes from the line of Ittai Kidron from Oppenheimer & Co. Please ask your question.

Thanks. Jeff, I'd like to start with you on Twilio engaged. Super excited for that announcement. I guess, help me think about the ramp here. I know when Flex came out conservative, but it clearly did very good out of the gate. You have already an established customer base here with Segment. Is there an opportunity for this business to ramp faster than one would think? And is there a -- do you need to make any adjustments on the go-to-market approach in pushing this product?

[Indiscernible] Jeff. So let me give you some forward-looking projections about the -- just kidding. You asked talking about the ramp up. They might -- obviously, I can't tell you specifically about the product. There are no -- I know where the ramp is [Indiscernible]. But what I can say is that a few things. Number 1, I think there's a lot of demand in the market for this tough play. Digital growth and digital personalization or how businesses are building their businesses is a tremendous opportunity. And that opportunity is actually accelerated by the [Indiscernible] changes, like on the world of IDFA tags and third-party cookies, and all those things getting change because companies here rely on what's just honestly shenanigans Like in the changes that have been going on, whether cookies or IDFA tags, these privacy changes are on the right side of history. And so, what Twilio's providing is the antidote to all those changes, which is a personalization and marketing system that starts with first-party data, that starts with a Company understanding, making sense of the first party signal they get from their customer, and the data of approach to then use that signal, use that first party data to then go personalized and build great relationships with their customer across all these touch points, whether it's marketing, contact center, sales, you name it, or whether it is a [Indiscernible] channel. Via messaging voice email, in an app, on the web, etc. That's the [Indiscernible] of how companies are going to win the hearts and minds, and [Indiscernible] of their customers. And the changes in privacy providing really nice tailwind, I think in the macro sense of what companies need to do in order to continue growing their relationships with their customers and gets you to growing their customers. So that's the first thing. And the second thing I want to point out, I think it's a very natural synergy with not one but two go-to-market. That's we have [Indiscernible] , is a natural up-sell from our messaging products. Because it makes our messaging even more powerful. And it's a natural up-sell from Segment, which allows you to do something [Indiscernible] which is actually [Indiscernible] and so I'm really looking forward if that product rolls out GA in 2022. I'm really looking forward [Indiscernible] bring that to customers [Indiscernible] product.

Very good. Maybe a follow-up for you, Khozema, on the retention rates. Maybe you can -- sorry, the net expansion. Maybe you can walk us through a little bit, perhaps of the puts and takes of that metric going forward. I know you still have the political activity, which, I guess, would weigh on that number next quarter. But I think you also are going to celebrate the anniversary of Segment, which will include. And I don't remember if Segment was above or below average on that standpoint. Can you help us think about what would be the right way to think about how net expansion rate is going to change over the next, call it, three, four quarters?

There are a couple of things there Ittai. Thanks for the question. First of all, we feel great about 131% expansion rate. The business is growing at really elevated levels and just given the sides that we are at our run rate and feel great about it and 131 is in the range of where we've been over the last several quarters, so really good progress seeing across the business. And we don't guide on expansion rate as you know and so, I think it will be a little bit premature for me to talk about where I anticipate that end up being in Q4 and beyond. But I will say is that, we do intend to be disclosed in our remarks earlier that Segment and we'll include as part of Q1 being the first full quarter close the anniversary of the acquisition and with all those results include Segment at that time. But we'll have to wait and see for that to work.

Very good. Good luck.

Thank you, Ittai.

Our next question -- sorry. Our next question comes from the line of Parker Lane of Stifel. Please ask your question.

Thanks for taking my question. Jeff, I was wondering if you could talk a little bit about the stickiness of the incumbent platforms in the CRM markets. And when you look at the B2C component there, how much appetite do you think there is for disruption of those legacy platforms, particularly as some of your competitors out there in the newer markets are launching their own CDP offerings? Thanks.

Yeah. Thanks, Parker. This is Jeff. So we're really excited about Segment which is obviously, the number one CDP in the market. We're really excited [Indiscernible] built on top of it. And interesting, when I look at the market, I just see a huge hole in the market for a platform that is helping B2C companies really understand their customers and execute on that understanding by personalizing every part of the journey empowering their employees with [Indiscernible]. And the [Indiscernible] market is a great one, but that's really about B2B It's not configured to do this. B2B CRN really start to us salespeople and ready notice which is to say completely different starting point, than what B2C companies [Indiscernible] and so the opportunity that we're going after, and what our customers are looking for is how do B2C customers with volumes of data allocate that data, understand it and act on it across all the different applications and all the touch points that they have. And that's a fundamentally different market that nobody has really cracked and that's the opportunity for Twilio's customer engagement platform and that's the opportunity that customers are pulling us towards because they [Indiscernible] and so that's what we see as the market is going on.

The next question comes from the line of Mark Murphy from JPMorgan. You may now ask your question.

Yes. Thank you very much. Jeff, question on Twilio Engage. What do you see as the differentiation or the line of demarcation there? If we compare it to some of your partners who provide cross-channel experiences where, they're using push and in-app and SMS and e-mail event. I believe some of them then send their messaging traffic to you if you could just help us maybe a little compare and contrast.

Thanks Mark. [Indiscernible] is a really [Indiscernible] landscape and we have as many companies out there doing all sorts of interesting things. And what we're seeing is that customers are really asking for a data approach to their growth [Indiscernible]. An approach that starts with data and then move out from that data into understanding customer, building [Indiscernible] and then building action from the data. And that's where Segment has always played and that's where Segment strengthened. So ultimately, we're serving an unmet need when customers come to us saying, hey, can Segment be used to build these journeys and then ultimately run this campaign? And that's the thing about Segment, is that not only we allow marketers to create these big segmentations and you heard it at SIGNAL about how into it when they went to like 30 -- or sorry, they went from 3 Segments that they can go whole customer base has come to 3 Segments to now 450, a net increase in engagement in our customer base from 20% to 50% We know it's a story of [Indiscernible] at SIGNAL last week, which is amazing. And for the Segment also allows the marketers to use all the data points to see the measure of the effective [Indiscernible] campaigns, which I think is another interesting point of engage. So instead of measuring a bunch of emails when they deliver, when they open, when they click on, Segment [Indiscernible] marketers to optimize for what actually drives revenue that result in people buying things, which, of course, is the ultimate goal. So what we're hearing from our customers is that the data first approach, which starts with having great data by your customers, that unlocks all sorts of new ways for smart growth marketers to do their job, and hopefully one that the market has against helpful.

I think I understand, yeah, so the CDP is the basis there. I had a quick follow-up, maybe for Khozema or Jeff. I think the sequential organic growth in revenue was a bit less than some of the prior quarters, although interestingly, I think the same thing happened a couple of quarters after you acquired SendGrid in Q3, so I guess we've seen that. Could you just touch on that, is that voice or video or something else? And just given you're reaffirming this 30% plus growth for 3 years, the -- can we presume that you have visibility into some better sequential build into Q4 or in early next year?

Yeah, Marc, it's Khozema. I'll take your question. I wouldn't read too much into product mix dynamics. I think we feel really good, and honestly about the sequential growth and just the overall growth of the Company at our scale and based off of our product set. And I think as we talked about, I think earlier in this call, you look at some of the things. We announced SIGNAL and the tools that's going to provide us going forward. We feel fantastic about the overall growth prospects of the business. So in terms of the setup on the 30% plus, I mean, we provided guidance obviously for Q4, and we feel really good about that. And we see continued strong growth into the future. And that 30% plus that we provided last year, we certainly see that on an organic basis over the next three years.

The next question comes from the line of Matt Stotlar of William Blair. You may now ask your questions.

Hey, guys. Thank you for taking me [Indiscernible] the questions here. I guess. One, just looking at the revenue growth performance in the quarter. So if you look at the relationship between dollar-based and expansion, which, to your point, it's been incredibly consistent in this range on a multiyear stack. When you look at the different between that and your organic growth that you guys reported, the relationship between those two essentially gives you some sense of the incremental revenue that you're generating from new customers in any given quarter. This quarter, that contribution seem to be the primary source of the step-down in organic growth. Sequentially, they go from 50 to 38. Can you just talk about anything that you're seeing in terms of what might be driving that lower contribution from revenue from new customers on organic basis this quarter or anything you're seeing in the market that can help us to make some sense of that?

Yeah. This is Khozema, Matt. I can talk about it from a financial perspective, and then maybe Marc can talk about it in terms of customer adoption perspective. I'd say there's nothing specifically that I haven't necessarily unpacked in terms of new customer growth. As you saw, in the quarter, we had very strong adds in terms of new customers. We had a great expansion rate in the quarter. We had strong overall revenue growth both on inorganic and organic basis. I think the math that you're trying to do is kind of directionally accurate, but there is a certain amount to unpack there, which is potentially offline. But I think in general, I would say we feel great about the overall prospects of the business. We feel great about the set up for Q4 and a lot of conviction in our 30% plus organic revenue growth over the next 3 years. Marc, you want to add maybe from a customer adoption perspective?

Certainly Khozema. Matt, thank you for your question. Some of the adoption standpoint we added Q3 across all aspects to business. And as you know we have a very diversified business that is relevant, and is a variety of economic conditions that's allowed us that we delivered these strong results. With even more encouraging, especially on the heels of signal, is the reaction that we're getting to the messages that we shared here today. And as Jeff elaborated on around the customer engagement platform, the value of that. Absolutely [Indiscernible] fully engaged in the progress are experiencing with Flex and [Indiscernible] this excitement around the data first models, everybody's looking for ways to deal with the new challenges that they're facing the market around first party data and results. We've heard really solid excitement that gives us confidence around the business as it is.

That's helpful. And then maybe just one more on -- just a quick one on the gross margin front. So what you gave is very helpful, right? I kind of taken out the A2P fees and understanding that was very helpful. You also signed a new commercial agreement with Syniverse early this year, which seemed like it would provide maybe a little bit of tailwind to gross margin. Is that something that was embedded in the results this quarter or is that something you can talk about in terms of how to [Indiscernible] going forward? Thank you.

Yeah, [Indiscernible] Syniverse, there's nothing really to talk about yet. We do expect that investment to take place before the conclusion of the year, but it's [Indiscernible] results yet, Matt.

Got it. Thanks again.

The next question comes from the line of Catharine Trebnick of Colliers Securities. Your line is open.

Hi, thank you for taking my question. Can you break down who you think your biggest competitors are at this point with the newly announced Twilio Engage? Thanks.

Hey, Catharine, this is Jeff. I'll take the question. So really our competitive sense has always been very diverse. No, there's typically not one competitor that we see in a whole lot of different situations and a lot of that is because of our unique developer first approach. Our developers bring Twilio in to such a wide variety of companies to solve such a wide variety of [Indiscernible] and that leads us into the Company in a way that sounds like a traditional like [Indiscernible]. So many of our deals are like that. So that's the historical of Twilio, and going forward, I'm looking at the new products, our customer engagement platform, which is really a new category There are products that are needing to be in the market and that's why we're building. And so when I look at what we're building [Indiscernible] Twilio Engage or whether it's the Segment CDP, like the normal and CDP in the market. On top of that, there will be a product that customers have been asking for, which is data first approach to market. And so, I just don't see it as a direct head-to-head, I think we're building something new, both in terms of each of the individual products. I think Flex is different than what's out there in the market, we're solving the problems that customers say they have and that's why we built Flex, same thing with Engage, same thing with Frontline, and these are the pillars really of our customer engagement platform, which as a whole is certainly solving a really unsolved problems for B2C companies. How do I understand my customers and engage with them? And there is a way to solve that problem at a platform level.

All right, thanks, I'll ask more on the next call. Appreciate it.

The next person to ask the question is Pat Walravens of JMP. You may now ask your questions.

Great. Thank you. Hey, Jeff, as we're looking into 2022 and hopefully it's pretty different than 2021 was. I am curious what you think your top two or three strategic imperatives are?

Thanks, Pat. So I know I can say we've been really progressing the Twilio engagement platform, our customer engagement platform. And so one of our first priorities this year was making sure that we brought to market Twilio Engage, and [Indiscernible] is a great [Indiscernible] introduction which we gave last week at SIGNAL. I'm also going to really prioritizing the Company, our teams, because we're obviously at the second year of the pandemic. These are difficult times for every team out there. It's really prioritizing those [Indiscernible], the productivity, and the growth of our team And our team has grown tremendously to push to pandemic. And then of course, our customers, and the customers is evolving under this time, and really spending many new customer challenges. Like sending those customers in our direction to help solve those challenges. So there's the pandemic, [Indiscernible] and the IDFA changes, and Company changes, and just the many things that companies are having to deal with that the world is rapidly evolving. And those companies have to become builders and have to build those relationships with customers, and keep on to be evolving landscape. Those are things that are pushing customers towards us. Giving us a lot of insights about we are dealing with a certain brand. And I've been very focused on that as well. So those are the three big areas, which is our products, our teams, our customers, which is why I think the right things for CEO to focus on.

Great, thank you.

Our last question comes from the line of Taylor McGinnis of UBS. Please ask your question.

Hi, thanks for taking my question. With gross margins flat this quarter relative to last and given all the A2Ps you guys have this quarter, how much of that was potentially driven by a mix shift from slowdown in messaging versus maybe more durable factors and efficiencies that you guys might be seeing? Was that just all mix shift related or is there something else driving that?

Hey, Taylor, this is Khozema. I'll take the question. I wouldn't say there's necessarily any one factor. I mean, I think what we're seeing is continued strength in the messaging business. And so there's not really like an underlying story relative to that product set. We continue to feel great about the growth prospects there as they've been over the last first half of the year and certainly in Q3 as well. I think equally we feel very excited about the performance of Segment and we continue to see higher growth in our application services category. Any given quarter means any one of the product mix dynamics or international, or even customers to some degree, are going to influence what the gross margin rate is in the particular quarter. So for now, we're really concentrated on gross profit dollar expansion. And obviously, over time, we do intend to work that gross margin number off [Indiscernible] come from, and mix shift in those [Indiscernible] services and certainly standby our longer-term target of 60% plus gross margins.

Great, thanks.

Very well. Thanks everybody for joining today. That will end the call for us. I look forward to chatting with you throughout the rest of the quarter.

Thank you again for participating. This concludes today's conference call. You may now disconnect.