Twilio Shakes Up Strategy: What's Next As 5% Workforce Cut Looms?

Twilio Inc TWLO shared plans to eliminate 5% of its current workforce. It looks to incur $25 million - $35 million in charges for the workforce reduction, consisting of expenditures for employee transition, notice period and severance payments, employee benefits, and related facilitation costs.

The company expects to incur most of the restructuring charges in the fourth quarter of 2023, which will likely be substantially complete by the end of the first quarter of 2024. 

Also Read: Spotify's Bold Move - CEO Announces Drastic 17% Workforce Cut

The company reiterated the fourth-quarter revenue forecast of $1.03 billion - $1.04 billion and adjusted EPS of 53 - 57 cents. 

The company streamlined its Communications business for efficiency and profit while organizing its TD&A business for growth. However, growth in TD&A has been below expectations, prompting Twilio to revise its approach for Flex and adjust investments in Segment. 

Fundamental changes include downsizing Segment's go-to-market (GTM) roles and consolidating Flex GTM into Communications, eliminating overlapping functions.

In future periods, Twilio Flex, the company's cloud contact center, will be reported as part of its Twilio Communications reportable segment. 

Severance packages include at least 12 weeks of base pay plus additional compensation based on tenure.

Twilio also plans to end Twilio Programmable Video as a standalone product, opting to partner with industry leaders instead. This move enables a sharper focus on core products like Messaging, Voice, and Email. 

Despite these changes, CEO Jeff Lawson remains optimistic about Twilio's direction towards balancing profit and growth, particularly with opportunities in CustomerAI.

Last week, activist Anson Funds acquired a stake in Twilio and pushed for its sale.

Price Action: TWLO shares were trading lower by 0.85% to $66.19 at the last check Monday.