Company Overview - Bandwidth (BAND) shares have increased by approximately 2.7% over the past month, underperforming the S&P 500 index [1] - The most recent earnings report is crucial for understanding the catalysts affecting the stock [1] Earnings Estimates - Estimates for Bandwidth have remained flat over the past month, with a significant shift of 300% in the consensus estimate [2] VGM Scores - Bandwidth has a strong Growth Score of A, but a low Momentum Score of F, and a Value Score of B, placing it in the second quintile for investment strategy [3] - The aggregate VGM Score for Bandwidth is A, indicating a strong overall performance across different investment strategies [3] Market Outlook - Bandwidth holds a Zacks Rank of 3 (Hold), suggesting an expectation of in-line returns in the upcoming months [4] Industry Performance - Bandwidth is part of the Zacks Communication - Infrastructure industry, where another player, CommScope (COMM), has seen a 19.5% increase in shares over the past month [5] - CommScope reported revenues of $1.11 billion for the last quarter, reflecting a year-over-year decline of 4.8%, with an EPS of $0.14 compared to -$0.08 a year ago [5] - CommScope is projected to have earnings of $0.24 per share for the current quarter, indicating a year-over-year decrease of 29.4% [6] - The Zacks Consensus Estimate for CommScope has remained unchanged over the last 30 days, and it also holds a Zacks Rank of 3 (Hold) [6]

Group 1 - A notable trend in the stock market is that several underperforming small and mid-cap stocks have raised their outlooks during a volatile Q1 earnings season [1] - Bandwidth (NASDAQ: BAND) is highlighted as a company within this context, indicating potential resilience or recovery in its performance [1] Group 2 - The analyst, Gary Alexander, has extensive experience in covering technology companies and has been involved with startups, providing insights into current industry themes [1] - Alexander has been a contributor to Seeking Alpha since 2017 and has been featured in various web publications, indicating a level of credibility and influence in the investment community [1]

Group 1 - Bandwidth (BAND) shares have decreased nearly 20% year-to-date, yet the company continues to deliver strong financial results [1] - The company is on track to exceed management's previously stated full-year guidance [1] Group 2 - The article highlights the importance of analyzing undercovered companies, particularly in sectors like technology, software, electronics, and energy transition [1] - The author emphasizes the goal of identifying asymmetric investment opportunities to achieve market-beating returns [1]

Core Insights - Bandwidth (BAND) reported revenue of $174.24 million for the quarter ended March 2025, reflecting a year-over-year increase of 1.9% and surpassing the Zacks Consensus Estimate of $168.87 million by 3.18% [1] - The company's EPS was $0.36, up from $0.27 in the same quarter last year, resulting in an EPS surprise of 24.14% compared to the consensus estimate of $0.29 [1] Financial Performance Metrics - Net retention rate was reported at 116%, exceeding the average estimate of 115.3% from three analysts [4] - Geographic Revenue from International markets was $22.45 million, significantly higher than the average estimate of $14.79 million, marking a year-over-year increase of 4.1% [4] - Geographic Revenue from North America was $151.79 million, slightly below the average estimate of $154.45 million, with a year-over-year change of 1.6% [4] - Revenue from Messaging surcharges reached $40.78 million, surpassing the four-analyst average estimate of $37.29 million [4] - Revenue from Cloud communications was $133.46 million, exceeding the four-analyst average estimate of $131.64 million [4] Stock Performance - Over the past month, Bandwidth's shares have returned +5.3%, while the Zacks S&P 500 composite has seen a +10.6% change [3] - The stock currently holds a Zacks Rank 5 (Strong Sell), indicating potential underperformance relative to the broader market in the near term [3]

Financial Performance - For the three months ended March 31, 2025, total revenue was $174 million, representing a 2% increase from $171 million in the same period of 2024[129]. - The net loss for the three months ended March 31, 2025, was $4 million, an improvement from a net loss of $9 million in the same period of 2024[129]. - The net retention rate increased to 116% for the three months ended March 31, 2025, compared to 107% for the same period in 2024[133]. - Non-GAAP net income for Q1 2025 was $11.13 million, compared to $7.82 million in Q1 2024, representing a 42% increase[187]. - Adjusted EBITDA for Q1 2025 was $22.21 million, up from $15.92 million in Q1 2024, indicating a 39% growth[190]. - The company reported a net loss of $(3.74) million for Q1 2025, an improvement from a net loss of $(9.23) million in Q1 2024[187]. Revenue Breakdown - Cloud communications revenue grew by $5 million, or 4%, to $133 million for the three months ended March 31, 2025, driven by higher voice traffic[153]. - Messaging surcharges revenue decreased by $2 million, or 4%, to $40 million for the three months ended March 31, 2025, primarily due to lower political messaging[154]. - Average annual customer revenue was $0.2 million for the three months ended March 31, 2025, showing a slight increase compared to the same period in 2024[155]. - Approximately 13% of total revenue for Q1 2025 was generated outside North America, indicating a stable international presence[203]. Cost and Expenses - Cost of revenue decreased to $102 million for the three months ended March 31, 2025, from $105 million in the same period of 2024, resulting in a gross profit of $71 million[151]. - Gross margin improved to 41% for the three months ended March 31, 2025, compared to 38% for the same period in 2024[151]. - For the three months ended March 31, 2025, total cost of revenue decreased by $3 million, or 3%, to $102.7 million compared to the same period in 2024, while gross profit increased by $6 million, or 9%, to $71.5 million[156][160]. - Research and development expenses rose by $1.7 million, or 6%, to $30.6 million, primarily due to increased headcount expenses[161]. - Sales and marketing expenses decreased by $2.7 million, or 9%, to $26.5 million, mainly due to lower headcount expenses[161]. - General and administrative expenses increased by $1.3 million, or 7%, to $19.1 million, driven by higher headcount expenses[162]. Cash Flow and Financing - Net cash used in operating activities was $3 million for the three months ended March 31, 2025, compared to net cash provided of $2.5 million in 2024[174]. - Net cash used in investing activities was $13.8 million, primarily for the purchase of property, plant, and equipment, and capitalized software development costs[176]. - Net cash used in financing activities was $29 million, consisting mainly of $26 million for the 2025 Repurchases[177]. - As of March 31, 2025, the company had cash and cash equivalents of $36 million and marketable securities of $6 million[169]. - As of March 31, 2025, the company had cash and cash equivalents of $36 million and marketable securities of $6 million[199]. Taxation - The effective tax rate for the three months ended March 31, 2025, was 1.8%, a decrease from 2.1% in the same period of 2024[148]. - The effective tax rate for the three months ended March 31, 2025, was 1.8%, compared to 2.1% in 2024, primarily due to a valuation allowance against deferred tax assets[164][165]. - The estimated Non-GAAP effective income tax rate was 19.4% for Q1 2025, compared to 13.0% for Q1 2024, influenced by research and development tax credits[187]. Stock and Market Impact - Stock-based compensation increased to $13.58 million in Q1 2025 from $12.34 million in Q1 2024, a rise of 10%[190]. - The company had gross carrying amounts of $258 million in outstanding Convertible Notes as of March 31, 2025[201]. - A hypothetical 10% adverse change in foreign currency exchange rates would have negatively impacted the net loss by approximately $1 million for Q1 2025[203].

Core Insights - Bandwidth Inc. reported strong first-quarter 2025 results, with adjusted earnings and revenues exceeding Zacks Consensus Estimates [1][4] - The company's growth is driven by increasing reliance on its cloud-based communications platform by enterprises, with a strategic focus on large enterprises and becoming a leading global CPaaS provider [2] Financial Performance - On a GAAP basis, Bandwidth's net loss for the quarter was $3.74 million, or a loss of 13 cents per share, an improvement from a net loss of $9.2 million, or 35 cents per share, in the prior-year quarter [3] - Non-GAAP net income was $11.4 million, or 36 cents per share, compared to $8.1 million, or 27 cents per share, in the prior-year quarter, beating the Zacks Consensus Estimate of 29 cents [4] - Quarterly revenues increased to $174 million from $171 million in the prior-year quarter, surpassing the consensus estimate of $169 million, driven by high demand for digital engagement and messaging services [4] Operating Metrics - Non-GAAP gross margin improved to 59%, up from 57% a year ago, due to a favorable product mix and operational efficiency [5] - Adjusted EBITDA was $22.2 million, significantly above guidance and up from $15.9 million in the prior-year period [5] Cash Flow and Liquidity - In the March quarter, net cash used in operating activities was $3.1 million, compared to cash generation of $2.5 million in the prior year [6] - As of March 31, 2025, cash and cash equivalents were $35.9 million, with convertible senior notes totaling $246.8 million [6] Future Guidance - Bandwidth anticipates continued growth, projecting revenues for 2025 to be between $745 million and $760 million, reflecting a year-over-year growth of 9-11% [7] - Adjusted EBITDA is forecasted to be in the range of $84 million to $91 million, an increase from the previous estimate of $82 million to $90 million [7] - For the second quarter, revenues are expected to be between $178 million and $180 million, with adjusted EBITDA anticipated in the range of $18 million to $20 million [8]

Financial Data and Key Metrics Changes - Total revenue for Q1 2025 was $174 million, a 7% year-over-year increase, normalized for 2024 cyclical political campaign revenue of $8 million [19] - Cloud communications revenue reached $133 million, reflecting a 6% year-over-year increase, also normalized for 2024 political campaign revenue [19] - Non-GAAP gross profit was $79 million, an 8% year-over-year increase, with a non-GAAP gross margin improvement to 59%, a two percentage point increase [20] - EBITDA grew by 40% to $22 million, exceeding expectations due to higher revenue and stronger margins [20] - Free cash flow performance was as expected, influenced by capital expenditures and working capital timing [20] Business Line Data and Key Metrics Changes - Enterprise Voice revenue grew 26% year-over-year, driven by strong demand from financial services and healthcare customers [21] - Global Voice Plans revenue increased by 4% year-over-year, supported by long-term customer expansions and new business from channel partnerships [21] - Programmable messaging accounted for 19% of cloud communications revenue, with a 9% year-over-year increase, driven by demand in key verticals [21] Market Data and Key Metrics Changes - The net retention rate for Q1 was 116%, with customer name retention above 99% [22] - Average annual revenue per customer reached a record $228,000, or $211,000 when excluding the political campaign benefit in 2024 [23] Company Strategy and Development Direction - The company is focused on disciplined execution, innovation, and delivering essential communications, with a strong emphasis on core platform growth [16] - The strategy includes expanding partnerships with managed service providers (MSPs) and system integrators to enhance market reach [30] - The company aims for double-digit core platform growth, profit expansion, and strengthening its capital structure for the full year 2025 [24] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of the business despite macroeconomic volatility, with no anticipated material impact from current tariff environments [19] - The company raised its full-year revenue outlook to a range of $745 million to $760 million, reflecting increased organic growth expectations [24] - Management highlighted the importance of AI integration in driving growth across all product categories, emphasizing the effectiveness of AI voice solutions [70] Other Important Information - The company received two Gold Stevie Awards for innovation in customer service and customer engagement initiatives [16] - Capital expenditures for the quarter were $10 million, focused on network expansion activities [23] Q&A Session Summary Question: Insights on enterprise voice growth and pipeline - Management noted a strong pipeline for enterprise voice customers, with more million-dollar deals signed in the quarter than ever before, indicating robust growth potential [29][30] Question: Confidence in back half of the year amidst uncertainty - Management expressed confidence in continued growth driven by enterprise voice traction and a resilient voice business, while acknowledging potential risks in programmable messaging [35][36] Question: Drivers behind increased average revenue per customer - The increase is attributed to more enterprise voice customers utilizing the Maestro platform and expanding their business, along with cross-selling opportunities [39][40] Question: Future of the partner ecosystem - Management highlighted the growing contribution from partnerships with large MSPs, which are expected to enhance deal cycle efficiency and complexity management [45][46] Question: AI's role in growth across product categories - AI is seen as a significant growth driver, enhancing customer experiences and operational efficiencies across global voice, enterprise voice, and programmable messaging [66][70]

Financial Data and Key Metrics Changes - Total revenue for Q1 2025 was $174 million, a 7% year-over-year increase, normalized for 2024 cyclical political campaign revenue of $8 million [20] - Cloud communications revenue reached $133 million, reflecting a 6% year-over-year increase, also normalized for 2024 political campaign revenue [20] - Non-GAAP gross profit increased to $79 million, marking an 8% year-over-year growth, with a non-GAAP gross margin improvement to 59%, a two percentage point increase [21] - EBITDA grew by 40% to $22 million, exceeding expectations due to higher revenue and stronger margins [21] - Free cash flow performance was as expected, influenced by capital expenditures and working capital timing [21] Business Line Data and Key Metrics Changes - Enterprise Voice revenue grew 26% year-over-year, driven by strong demand from financial services and healthcare customers [22] - Global Voice Plans revenue increased by 4% year-over-year, supported by long-term customer expansions and new business from channel partnerships [22] - Programmable messaging accounted for 19% of cloud communications revenue, with a 9% year-over-year increase, driven by demand in key verticals including e-commerce and financial services [22] Market Data and Key Metrics Changes - The net retention rate for Q1 was 116%, with customer name retention above 99% [22] - Average annual revenue per customer reached a record $228,000, or $211,000 when excluding the political campaign benefit in 2024 [22] Company Strategy and Development Direction - The company is focused on disciplined execution, innovation, and delivering essential communications, with a strong emphasis on the Maestro platform for enterprise voice and AI integration [6][10] - The strategy includes expanding partnerships with managed service providers (MSPs) and system integrators to enhance market reach and customer engagement [11][31] - The company aims for double-digit core platform growth, profit expansion, and strengthening its capital structure in 2025 [23][25] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the resilience of the business despite macroeconomic volatility, raising the full-year revenue outlook to $745 million to $760 million [20][25] - The company anticipates continued growth in enterprise voice and global voice plans, with a focus on maintaining strong customer relationships and expanding service offerings [34][36] - Management acknowledged potential risks in programmable messaging due to its exposure to retail and digital engagement markets, but emphasized the essential nature of voice communications [36] Other Important Information - The company received two Gold Stevie Awards for innovation in customer service and customer engagement initiatives, reflecting its commitment to customer satisfaction [17] - The company ended the quarter with a cash and securities balance of $42 million and no borrowings under its credit line [23] Q&A Session Summary Question: Insights on enterprise voice growth and pipeline - Management reported a strong pipeline for enterprise voice customers, with more million-dollar deals signed than ever before, indicating robust growth potential [30] Question: Confidence in back half of the year amidst market uncertainty - Management raised the second half outlook, expecting double-digit organic growth driven by enterprise voice and global voice plans, while monitoring risks in programmable messaging [34][36] Question: Drivers behind increased average revenue per customer - The increase is attributed to more enterprise voice customers utilizing the Maestro platform and expanding their business, along with cross-selling opportunities [39] Question: Durability of gross margin performance - Management expects margins to remain stable throughout the year, with confidence in achieving medium-term targets [41] Question: Future of the partner ecosystem and its contribution - Management highlighted the growing importance of partnerships with MSPs and the potential for increased sales through these channels [45][49] Question: Strategies to regain share in the messaging business - The focus will be on driving deliverability and expanding channels, including RCS and RBM, to enhance customer engagement and grow the messaging business [51][54] Question: Success factors in the healthcare vertical - The Maestro platform's ability to integrate innovation into complex healthcare environments is a key differentiator, with opportunities for expansion into other verticals like hospitality and manufacturing [58][60] Question: Key drivers for Global Voice business growth - Management expects Global Voice plans to double its growth rate, driven by onboarding new customers and leveraging channel partnerships [63]

Core Viewpoint - Bandwidth (BAND) reported quarterly earnings of $0.36 per share, exceeding the Zacks Consensus Estimate of $0.29 per share, and showing an increase from $0.27 per share a year ago, indicating a 24.14% earnings surprise [1] Financial Performance - Bandwidth achieved revenues of $174.24 million for the quarter ended March 2025, surpassing the Zacks Consensus Estimate by 3.18% and reflecting a year-over-year increase from $171.03 million [2] - The company has exceeded consensus EPS estimates three times over the last four quarters and has topped consensus revenue estimates four times in the same period [2] Stock Performance and Outlook - Bandwidth shares have declined approximately 27.9% since the beginning of the year, contrasting with the S&P 500's decline of 4.7% [3] - The company's earnings outlook is crucial for assessing future stock performance, with current consensus EPS estimates at $0.31 for the upcoming quarter and $1.51 for the current fiscal year [7] Industry Context - The Communication - Infrastructure industry, to which Bandwidth belongs, is currently ranked in the top 39% of over 250 Zacks industries, suggesting a favorable industry outlook [8] - Empirical research indicates a strong correlation between near-term stock movements and trends in earnings estimate revisions, which can impact Bandwidth's stock performance [5]

1Q25 Earnings Results May 7, 2025 Legal disclaimer This presentation includes forward-looking statements. All statements contained in this presentation other than statements of historical facts, including, without limitation, future financial and business performance for the quarter ending June 30, 2025 and year ending December 31, 2025, the success of our product offerings and our platform, and the value proposition of our products, are forward-looking statements. The words "anticipate," "assume," "believe ...