[PART I - FINANCIAL INFORMATION](index=5&type=section&id=PART%20I%20-%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements](index=5&type=section&id=Item%201.%20Financial%20Statements) This section presents Bandwidth Inc's unaudited condensed consolidated financial statements and related notes [Unaudited Condensed Consolidated Balance Sheets](index=5&type=section&id=Unaudited%20Condensed%20Consolidated%20Balance%20Sheets%20as%20of%20March%2031%2C%202022%20and%20December%2031%2C%202021) Condensed Consolidated Balance Sheet Highlights (In thousands) | Metric | March 31, 2022 | December 31, 2021 | | :---------------------------------- | :------------- | :------------------ | | Total assets | $1,054,196 | $1,065,539 | | Total liabilities | $802,709 | $652,944 | | Total stockholders' equity | $251,487 | $412,595 | [Unaudited Condensed Consolidated Statements of Operations](index=6&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Operations%20for%20the%20Three%20Months%20Ended%20March%2031%2C%202022%20and%202021) Condensed Consolidated Statements of Operations Highlights (Three Months Ended March 31, In thousands, except per share amounts) | Metric | 2022 | 2021 | | :-------------------------------------------------- | :------- | :------- | | Revenue | $131,364 | $113,479 | | Cost of revenue | $75,950 | $62,321 | | Gross profit | $55,414 | $51,158 | | Operating loss | $(6,870) | $(37) | | Net loss | $(6,814) | $(5,316) | | Net loss per share, basic and diluted | $(0.27) | $(0.21) | | Weighted average common shares outstanding | 25,220,052 | 25,015,948 | - Revenue increased by **16% year-over-year** to $131,364 thousand, while net loss widened to **$(6,814) thousand** from $(5,316) thousand in Q1 2021[17](index=17&type=chunk) [Unaudited Condensed Consolidated Statements of Comprehensive Loss](index=7&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss%20for%20the%20Three%20Months%20Ended%20March%2031%2C%202022%20and%202021) Condensed Consolidated Statements of Comprehensive Loss (Three Months Ended March 31, In thousands) | Metric | 2022 | 2021 | | :------------------------------------ | :------- | :------- | | Net loss | $(6,814) | $(5,316) | | Foreign currency translation, net of income taxes | $(10,516) | $(23,185) | | Total comprehensive loss | $(17,330) | $(28,501) | - Total comprehensive loss decreased to **$(17,330) thousand** from $(28,501) thousand in Q1 2021, primarily due to a smaller foreign currency translation loss[20](index=20&type=chunk) [Unaudited Condensed Consolidated Statements of Changes in Stockholders' Equity](index=8&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) - Stockholders' equity decreased from $412,595 thousand to **$251,487 thousand**, significantly impacted by an accounting standard adoption (ASU 2020-06)[14](index=14&type=chunk)[26](index=26&type=chunk) - Foreign currency translation resulted in a **$(10,516) thousand loss** for the three months ended March 31, 2022[26](index=26&type=chunk) [Unaudited Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Unaudited%20Condensed%20Consolidated%20Statements%20of%20Cash%20Flows%20for%20the%20Three%20Months%20Ended%20March%2031%2C%202022%20and%202021) Condensed Consolidated Statements of Cash Flows (Three Months Ended March 31, In thousands) | Cash Flow Activity | 2022 | 2021 | | :---------------------------------------------------------------- | :------- | :------- | | Net cash (used in) provided by operating activities | $(6,695) | $10,009 | | Net cash (used in) provided by investing activities | $(5,925) | $22,116 | | Net cash (used in) provided by financing activities | $(1,624) | $215,294 | | Net (decrease) increase in cash, cash equivalents, and restricted cash | $(15,300) | $247,821 | | Cash, cash equivalents, and restricted cash, end of period | $316,989 | $329,258 | - The company experienced a net decrease in cash of **$(15,300) thousand** in Q1 2022, a significant shift from a net increase of $247,821 thousand in Q1 2021[29](index=29&type=chunk) [Notes to Unaudited Condensed Consolidated Financial Statements](index=11&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) [Note 1. Organization and Description of Business](index=11&type=section&id=1.%20Organization%20and%20Description%20of%20Business) - Bandwidth Inc is a global cloud-based Communications Platform-as-a-Service (CPaaS) provider[32](index=32&type=chunk) - The company consolidated its reporting from two segments to a **single segment** in Q1 2022 due to strategic alignment[33](index=33&type=chunk) [Note 2. Summary of Significant Accounting Policies](index=11&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) - The company changed its presentation of certain costs in Q1 2022 to align with benchmarked definitions, with no impact on revenue or net income[36](index=36&type=chunk)[37](index=37&type=chunk) - The company adopted ASU 2020-06, which reversed the separation of convertible debt into liability and equity components, now accounting for it entirely as debt[51](index=51&type=chunk) - The adoption of ASU 2020-06 decreased non-cash interest expense by **$6.6 million** for the three months ended March 31, 2022[51](index=51&type=chunk) Impact of Cost Alignment on Statement of Operations (Three Months Ended March 31, 2021, In thousands) | Statement of Operations | As previously reported | Conformed to current definitions | | :---------------------- | :--------------------- | :------------------------------- | | Cost of revenue | $61,328 | $62,321 | | Research and development | $13,333 | $16,789 | | Sales and marketing | $11,992 | $19,110 | | General and administrative | $26,863 | $15,296 | [Note 3. Fair Value Measurements](index=14&type=section&id=3.%20Fair%20Value%20Measurements) - The fair value of 2026 and 2028 Convertible Notes was approximately **$309.5 million** and **$164.8 million**, respectively, as of March 31, 2022[57](index=57&type=chunk) Financial Assets Measured at Fair Value (In thousands) | Financial Assets | March 31, 2022 | December 31, 2021 | | :----------------------- | :------------- | :------------------ | | Money market account | $230,003 | $241,157 | [Note 4. Financial Statement Components](index=15&type=section&id=4.%20Financial%20Statement%20Components) - Unbilled receivables increased from $31.8 million to **$35.5 million** at March 31, 2022, representing earned revenue to be billed in the next cycle[45](index=45&type=chunk)[59](index=59&type=chunk) Accounts Receivable, Net of Allowances (In thousands) | Component | March 31, 2022 | December 31, 2021 | | :------------------------------------------------------- | :------------- | :------------------ | | Trade accounts receivable | $32,256 | $31,036 | | Unbilled accounts receivable | $35,515 | $31,786 | | Allowance for doubtful accounts and reserve for expected credit losses | $(1,680) | $(1,661) | | Other accounts receivable | $2,736 | $411 | | Total accounts receivable, net | $68,827 | $61,572 | Allowance for Doubtful Accounts Rollforward (Three Months Ended March 31, In thousands) | Metric | 2022 | 2021 | | :--------------------------------- | :------- | :------- | | Balance, beginning of period | $(1,661) | $(1,203) | | Charged to bad debt expense | $(141) | $(48) | | Deductions (write-offs) | $111 | $10 | | Impact of foreign currency translation | $11 | $23 | | Balance, end of period | $(1,680) | $(1,218) | [Note 5. Right-of-Use Asset and Lease Liabilities](index=16&type=section&id=5.%20Right-of-Use%20Asset%20and%20Lease%20Liabilities) - The company entered into a lease for a new corporate headquarters with total lease payments over the initial 20-year term of approximately **$495.7 million**[75](index=75&type=chunk)[76](index=76&type=chunk) Lease Expense Components (Three Months Ended March 31, In thousands) | Lease Cost Component | 2022 | 2021 | | :-------------------------- | :------- | :------- | | Operating lease cost | $2,138 | $1,614 | | Finance lease cost: Depreciation | $50 | $47 | | Finance lease cost: Interest | $3 | $0 | | Sublease income | $(96) | $(96) | | Total net lease cost | $2,095 | $1,565 | Lease Assets and Liabilities (In thousands) | Metric | March 31, 2022 | December 31, 2021 | | :------------------------------------------------ | :------------- | :------------------ | | Operating lease assets, net | $15,419 | $14,061 | | Finance lease assets, net | $358 | $373 | | Total leased assets | $15,777 | $14,434 | | Operating lease liability, current | $7,208 | $5,807 | | Finance lease liability, current | $170 | $177 | | Operating lease liability, non-current | $10,711 | $10,958 | | Finance lease liability, non-current | $195 | $202 | | Total lease liabilities | $18,284 | $17,144 | [Note 6. Property, Plant and Equipment](index=20&type=section&id=6.%20Property%2C%20Plant%20and%20Equipment) - Capitalized software development costs were **$0.7 million** in Q1 2022, down from $1.1 million in Q1 2021[79](index=79&type=chunk) Property, Plant and Equipment, Net (In thousands) | Component | March 31, 2022 | December 31, 2021 | | :--------------------------------- | :------------- | :------------------ | | Total cost | $139,336 | $139,336 | | Less—accumulated depreciation | $(69,732) | $(69,732) | | Total property, plant and equipment, net | $69,604 | $69,604 | Total Depreciation Expense (Three Months Ended March 31, In thousands) | Category | 2022 | 2021 | | :----------------------------- | :------- | :------- | | Cost of revenue | $3,376 | $3,146 | | Research and development | $592 | $453 | | Sales and marketing | $334 | $284 | | General and administrative | $302 | $293 | | Total depreciation expense | $4,604 | $4,176 | [Note 7. Intangible Assets](index=21&type=section&id=7.%20Intangible%20Assets) - Total intangible assets, net, decreased from $211,217 thousand to **$202,502 thousand** at March 31, 2022[14](index=14&type=chunk)[85](index=85&type=chunk) Intangible Assets, Net (March 31, 2022, In thousands) | Intangible Asset | Gross Amount | Accumulated Amortization | Net Carrying Value | Amortization Period (In years) | | :----------------------- | :----------- | :----------------------- | :----------------- | :----------------------------- | | Customer relationships | $152,005 | $(19,135) | $132,870 | 15 - 20 | | Developed technology | $80,234 | $(11,366) | $68,868 | 10 | | Other, definite lived | $2,828 | $(2,828) | $0 | 2 - 7 | | Licenses, indefinite lived | $764 | $0 | $764 | Indefinite | | Total intangible assets, net | $235,831 | $(33,329) | $202,502 | | Total Amortization Expense (Three Months Ended March 31, In thousands) | Category | 2022 | 2021 | | :----------------------------- | :------- | :------- | | Cost of revenue | $2,032 | $2,176 | | Sales and marketing | $2,534 | $2,692 | | Total amortization expense | $4,566 | $4,868 | [Note 8. Debt](index=22&type=section&id=8.%20Debt) - The company has **$400 million** of 0.25% Convertible Notes due 2026 and **$250 million** of 0.50% Convertible Notes due 2028[91](index=91&type=chunk)[102](index=102&type=chunk) - Upon adoption of ASU 2020-06, the company reversed the separation of debt and equity components for its Convertible Notes, now accounting for them entirely as debt[100](index=100&type=chunk)[111](index=111&type=chunk)[119](index=119&type=chunk) - The conditional conversion feature for both 2026 and 2028 Convertible Notes was **not triggered** during Q1 2022[97](index=97&type=chunk)[108](index=108&type=chunk) Convertible Notes Net Carrying Amount (In thousands) | Convertible Notes | March 31, 2022 | December 31, 2021 | | :----------------------------------- | :------------- | :------------------ | | 2026 Convertible Notes net carrying amount | $392,169 | $301,923 | | 2028 Convertible Notes net carrying amount | $243,558 | $184,517 | | Total net carrying amount | $635,727 | $486,440 | Total Interest Expense Related to Convertible Notes (Three Months Ended March 31, In thousands) | Interest Expense Component | 2022 | 2021 | | :----------------------------------------------------------- | :------- | :------- | | 2026 Convertible Notes: Contractual interest expense | $250 | $250 | | 2026 Convertible Notes: Amortization of debt discount | $0 | $4,510 | | 2026 Convertible Notes: Amortization of debt issuance costs | $495 | $296 | | Total interest expense related to 2026 Convertible Notes | $745 | $5,056 | | 2028 Convertible Notes: Contractual interest expense | $313 | $52 | | 2028 Convertible Notes: Amortization of debt discount | $0 | $333 | | 2028 Convertible Notes: Amortization of debt issuance costs | $265 | $28 | | Total interest expense related to 2028 Convertible Notes | $578 | $413 | | Total interest expense | $1,323 | $5,469 | [Note 9. Geographic Information](index=30&type=section&id=9.%20Geographic%20Information) - International revenue increased by **22% year-over-year** to $15,479 thousand in Q1 2022[123](index=123&type=chunk) - Long-lived assets held outside the United States increased from $9.2 million to **$11.9 million** at March 31, 2022[122](index=122&type=chunk) Revenue by Geographic Area (Three Months Ended March 31, In thousands) | Geographic Area | 2022 | 2021 | | :---------------- | :------- | :------- | | United States | $115,885 | $100,798 | | International | $15,479 | $12,681 | | Total | $131,364 | $113,479 | [Note 10. Stockholders' Equity](index=30&type=section&id=10.%20Stockholders'%20Equity) - As of March 31, 2022, the company had **23,309,031 shares of Class A** and **1,965,170 shares of Class B** common stock outstanding[125](index=125&type=chunk) Reserved Shares of Class A Common Stock for Stock-Based Awards | Category | March 31, 2022 | December 31, 2021 | | :--------------------------------------------------- | :------------- | :------------------ | | Stock options issued and outstanding | 164,114 | 180,209 | | Nonvested restricted stock units issued and outstanding | 793,848 | 344,486 | | Stock-based awards available for grant under the 2017 Plan | 3,625,235 | 3,060,674 | | Total | 4,583,197 | 3,585,369 | [Note 11. Stock-Based Compensation](index=31&type=section&id=11.%20Stock-Based%20Compensation) - The 2017 Incentive Award Plan automatically increased shares available for grant by **1,158,900** on January 1, 2022[131](index=131&type=chunk) Stock Option Activity (Three Months Ended March 31, 2022) | Metric | Number of options outstanding | | :----------------------------------------------------------- | :---------------------------- | | Outstanding as of December 31, 2021 | 180,209 | | Exercised | (16,095) | | Outstanding as of March 31, 2022 | 164,114 | | Options vested and exercisable at March 31, 2022 | 164,114 | Restricted Stock Unit (RSU) Activity (Three Months Ended March 31, 2022) | Metric | Number of awards outstanding | | :----------------------------------------------------------- | :---------------------------- | | Nonvested RSUs as of December 31, 2021 | 344,486 | | Granted | 627,724 | | Vested | (144,977) | | Forfeited or cancelled | (33,385) | | Nonvested RSUs as of March 31, 2022 | 793,848 | Total Stock-Based Compensation Expense (Three Months Ended March 31, In thousands) | Category | 2022 | 2021 | | :----------------------------- | :------- | :------- | | Cost of revenue | $99 | $101 | | Research and development | $1,868 | $1,080 | | Sales and marketing | $899 | $710 | | General and administrative | $2,480 | $2,499 | | Total | $5,346 | $4,390 | [Note 12. Commitments and Contingencies](index=33&type=section&id=12.%20Commitments%20and%20Contingencies) - The company has non-cancellable purchase obligations totaling **$13.7 million** as of March 31, 2022[145](index=145&type=chunk) - The new corporate headquarters lease has total lease payments of approximately **$495.7 million** over the initial 20-year term[147](index=147&type=chunk) [Note 13. Employee Benefit Plans](index=34&type=section&id=13.%20Employee%20Benefit%20Plans) - Company matching contributions for defined contribution plans increased from $0.9 million to **$1.2 million** in Q1 2022[152](index=152&type=chunk) Net Periodic Pension Cost (Three Months Ended March 31, In thousands) | Component | 2022 | 2021 | | :-------------------------- | :------- | :------- | | Service cost | $70 | $103 | | Interest cost | $9 | $5 | | Return on plan assets | $(7) | $(4) | | Net periodic pension cost | $72 | $104 | [Note 14. Income Taxes](index=35&type=section&id=14.%20Income%20Taxes) - The effective tax rate decreased from 5.9% in Q1 2021 to **(2.7)%** in Q1 2022 due to a valuation allowance against deferred tax assets[156](index=156&type=chunk)[157](index=157&type=chunk) [Note 15. Related Parties](index=35&type=section&id=15.%20Related%20Parties) - Amounts charged under services arrangements with Relay, Inc totaled **$0.4 million** in Q1 2022[158](index=158&type=chunk) [Note 16. Basic and Diluted Loss per Common Share](index=35&type=section&id=16.%20Basic%20and%20Diluted%20Loss%20per%20Common%20Share) Basic and Diluted Loss per Common Share (Three Months Ended March 31, In thousands, except per share amounts) | Metric | 2022 | 2021 | | :----------------------------------------------------------- | :------- | :------- | | Net loss attributable to common stockholders | $(6,814) | $(5,316) | | Net loss per share, basic and diluted | $(0.27) | $(0.21) | | Weighted average number of common shares outstanding, basic and diluted | 25,220,052 | 25,015,948 | Common Share Equivalents Excluded from Diluted EPS (Anti-dilutive) | Category | March 31, 2022 | March 31, 2021 | | :-------------------------------- | :------------- | :------------- | | Stock options issued and outstanding | 164,114 | 196,433 | | Restricted stock units issued and outstanding | 793,848 | 405,875 | | Convertible senior notes | 5,788,805 | 1,812,134 | | Total | 6,746,767 | 2,414,442 | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=37&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section provides management's perspective on financial condition and results of operations for Q1 2022 [Overview](index=37&type=section&id=Overview) - Bandwidth Inc is a leading global enterprise cloud communications platform-as-a-service (CPaaS) provider[167](index=167&type=chunk) - The company owns and operates a nationwide IP voice network in the U.S and has a global platform across over 60 countries[168](index=168&type=chunk) Key Financial and Operational Highlights (Three Months Ended March 31) | Metric | 2022 | 2021 | Change (%) | | :-------------------- | :------- | :------- | :--------- | | Total Revenue | $131M | $113M | 16% | | Net Loss | $7M | $5M | 40% | | Active Customer Accounts | 3,372 | 2,999 | 12% | [Segment Reporting Update and Cost Alignment](index=37&type=section&id=Segment%20Reporting%20Update%20and%20Cost%20Alignment) - Bandwidth consolidated from two segments to a **single segment** in Q1 2022 due to strategic alignment[171](index=171&type=chunk) - The company also re-aligned cost presentations, which did not impact revenue or net income for any periods presented[172](index=172&type=chunk) Impact of Cost Alignment on Statement of Operations (Three Months Ended March 31, 2021, In thousands) | Statement of Operations | As previously reported | Conformed to current definitions | | :---------------------- | :--------------------- | :------------------------------- | | Cost of revenue | $61,328 | $62,321 | | Research and development | $13,333 | $16,789 | | Sales and marketing | $11,992 | $19,110 | | General and administrative | $26,863 | $15,296 | [COVID-19 Update](index=38&type=section&id=COVID-19%20Update) - The COVID-19 pandemic continues to create uncertainty, potentially impacting business spending and customer demand[174](index=174&type=chunk) - The company anticipates potential curtailed customer demand as the pandemic abates, which could adversely affect future financial performance[174](index=174&type=chunk) [DDoS Attack](index=38&type=section&id=DDoS%20Attack) - In September 2021, Bandwidth's network was subjected to a **distributed denial of service (DDoS) attack**, causing service disruptions[175](index=175&type=chunk) - Mitigation efforts have largely stabilized the network, though some intermittent disruptions continued[175](index=175&type=chunk) [Key Performance Indicators](index=39&type=section&id=Key%20Performance%20Indicators) - Active customer accounts increased by **12% year-over-year** to 3,372, while the dollar-based net retention rate decreased from 131% to **114%**[178](index=178&type=chunk) - Adjusted EBITDA decreased by **37.5% year-over-year** to $8,368 thousand, and free cash flow declined significantly to **$(12,620) thousand**[178](index=178&type=chunk) Key Performance Indicators (Three Months Ended March 31, Dollars in thousands) | Metric | 2022 | 2021 | | :-------------------------------- | :------- | :------- | | Number of active customers | 3,372 | 2,999 | | Dollar-based net retention rate | 114% | 131% | | Adjusted EBITDA | $8,368 | $13,397 | | Free cash flow | $(12,620) | $2,125 | [Key Components of Statements of Operations](index=40&type=section&id=Key%20Components%20of%20Statements%20of%20Operations) - Revenue is primarily derived from reoccurring sources like per-minute usage and monthly recurring charges[183](index=183&type=chunk) - Cost of revenue includes fees to network service providers, network operations costs, and personnel costs[185](index=185&type=chunk) - Operating expenses are expected to **increase in absolute dollars**[188](index=188&type=chunk) - The effective tax rate for Q1 2022 was **(2.7)%**, down from 5.9% in Q1 2021, due to a valuation allowance[192](index=192&type=chunk) [Results of Operations (Consolidated)](index=42&type=section&id=Results%20of%20Operations) - Gross margin decreased to **42%** in Q1 2022 from 45% in Q1 2021, primarily due to a $14 million increase in messaging usage costs[199](index=199&type=chunk) - R&D expenses increased by **34%** and Sales & Marketing expenses increased by **21%**, driven by higher personnel and facilities costs[201](index=201&type=chunk)[202](index=202&type=chunk) - Interest expense, net, decreased by **$4 million** in Q1 2022 compared to Q1 2021[203](index=203&type=chunk) Consolidated Statements of Operations (Three Months Ended March 31, In thousands) | Metric | 2022 | 2021 | Change ($) | Change (%) | | :-------------------------------- | :------- | :------- | :--------- | :--------- | | Revenue | $131,364 | $113,479 | $17,885 | 16% | | Cost of revenue | $75,950 | $62,321 | $13,629 | 22% | | Gross profit | $55,414 | $51,158 | $4,256 | 8% | | Operating expenses | $62,284 | $51,195 | $11,089 | 22% | | Operating loss | $(6,870) | $(37) | $(6,833) | >100% | | Net loss | $(6,814) | $(5,316) | $(1,498) | 28% | [Liquidity and Capital Resources](index=44&type=section&id=Liquidity%20and%20Capital%20Resources) - Liquidity is provided by free cash flow from operations and financing activities[205](index=205&type=chunk) - Principal future commitments include **$650.0 million** in Convertible Notes and a **$496 million** lease for a future office headquarters[206](index=206&type=chunk) - The company expects its cash and cash equivalents to be sufficient for anticipated cash needs for at least the next **12 months**[205](index=205&type=chunk) [Statement of Cash Flows](index=45&type=section&id=Statement%20of%20Cash%20Flows) - Net cash used in operating activities was **$7 million** in Q1 2022, a decrease from $10 million provided in Q1 2021[210](index=210&type=chunk) - Net cash used in investing activities was **$6 million** in Q1 2022, compared to $22 million provided in Q1 2021[209](index=209&type=chunk)[211](index=211&type=chunk) - Net cash used in financing activities was **$2 million** in Q1 2022, a significant decrease from $215 million provided in Q1 2021[209](index=209&type=chunk)[212](index=212&type=chunk) Summary of Cash Flows (Three Months Ended March 31, In thousands) | Cash Flow Activity | 2022 | 2021 | | :---------------------------------------------------------------- | :------- | :------- | | Net cash (used in) provided by operating activities | $(6,695) | $10,009 | | Net cash (used in) provided by investing activities | $(5,925) | $22,116 | | Net cash (used in) provided by financing activities | $(1,624) | $215,294 | | Net (decrease) increase in cash, cash equivalents, and restricted cash | $(15,300) | $247,821 | [Off-Balance Sheet Arrangements](index=45&type=section&id=Off-Balance%20Sheet%20Arrangements) - The company has off-balance sheet agreements for short-term leases totaling **$237 thousand**[213](index=213&type=chunk) [Non-GAAP Financial Measures](index=46&type=section&id=Non-GAAP%20Financial%20Measures) - The company uses Non-GAAP gross profit, Non-GAAP net income, Adjusted EBITDA, and free cash flow to evaluate performance[215](index=215&type=chunk) Non-GAAP Gross Profit and Margin (Three Months Ended March 31, In thousands) | Metric | 2022 | 2021 | | :--------------------------------- | :------- | :------- | | Gross Profit | $55,414 | $51,158 | | Depreciation | $3,376 | $3,146 | | Amortization of acquired intangible assets | $2,032 | $2,176 | | Stock-based compensation | $99 | $101 | | Non-GAAP Gross Profit | $60,921 | $56,581 | | Non-GAAP Gross Margin % | 53% | 52% | Non-GAAP Net Income (Three Months Ended March 31, In thousands) | Metric | 2022 | 2021 | | :----------------------------------------------------------- | :------- | :------- | | Net loss | $(6,814) | $(5,316) | | Stock-based compensation | $5,346 | $4,390 | | Amortization of acquired intangibles | $4,566 | $4,868 | | Amortization of debt discount and issuance costs for convertible debt | $760 | $5,167 | | Non-GAAP net income | $2,544 | $8,303 | | Non-GAAP diluted net income per share | $0.09 | $0.30 | Adjusted EBITDA (Three Months Ended March 31, In thousands) | Metric | 2022 | 2021 | | :--------------------------------- | :------- | :------- | | Net loss | $(6,814) | $(5,316) | | Income tax provision (benefit) | $179 | $(332) | | Interest expense, net | $1,250 | $5,410 | | Depreciation | $4,604 | $4,176 | | Amortization | $4,566 | $4,868 | | Stock-based compensation | $5,346 | $4,390 | | Adjusted EBITDA | $8,368 | $13,397 | Free Cash Flow (Three Months Ended March 31, In thousands) | Metric | 2022 | 2021 | | :----------------------------------------------------------- | :------- | :------- | | Net cash (used in) provided by operating activities | $(6,695) | $10,009 | | Net cash used in investing in capital assets | $(5,925) | $(7,884) | | Free cash flow | $(12,620) | $2,125 | [Critical Accounting Policies and Significant Judgments and Estimates](index=50&type=section&id=Critical%20Accounting%20Policies%20and%20Significant%20Judgments%20and%20Estimates) - Critical accounting policies include revenue recognition, stock-based compensation, and goodwill valuation[231](index=231&type=chunk) - There have been **no material changes** to critical accounting policies compared to the Annual Report on Form 10-K[231](index=231&type=chunk) [Recently Issued Accounting Guidance](index=50&type=section&id=Recently%20Issued%20Accounting%20Guidance) - Refer to Note 2 for a summary of recently adopted and not yet adopted accounting standards[232](index=232&type=chunk) [Item 3. Quantitative and Qualitative Disclosure About Market Risk](index=51&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosure%20About%20Market%20Risk) This section discusses the company's exposure to market risks, primarily interest rate and foreign currency fluctuations [Interest Rate Risk](index=51&type=section&id=Interest%20Rate%20Risk) - The company's primary market risk is interest rate changes, with **$316.0 million** in cash and cash equivalents[235](index=235&type=chunk) - The **$650.0 million** in Convertible Notes have fixed annual interest rates, limiting direct interest rate exposure[236](index=236&type=chunk) [Foreign Currency Risk](index=51&type=section&id=Foreign%20Currency%20Risk) - Approximately **12% of total revenue** was generated outside the United States for Q1 2022[237](index=237&type=chunk) - The majority of revenues and operating expenses are denominated in U.S dollars, limiting significant foreign currency risk[237](index=237&type=chunk) [Inflation](index=51&type=section&id=Inflation) - The company monitors inflation to minimize its effects through pricing strategies and cost reductions[238](index=238&type=chunk) [Item 4. Controls and Procedures](index=52&type=section&id=Item%204.%20Controls%20and%20Procedures) This section details management's evaluation of disclosure controls and procedures, concluding their effectiveness [Evaluation of disclosure controls and procedures](index=52&type=section&id=Evaluation%20of%20disclosure%20controls%20and%20procedures) - Management concluded that disclosure controls and procedures were **effective** at a reasonable assurance level as of March 31, 2022[240](index=240&type=chunk) [Changes in internal control over financial reporting](index=52&type=section&id=Changes%20in%20internal%20control%20over%20financial%20reporting) - There were **no material changes** in internal control over financial reporting during the quarter ended March 31, 2022[241](index=241&type=chunk) [Inherent limitation on the effectiveness of internal control](index=52&type=section&id=Inherent%20limitation%20on%20the%20effectiveness%20of%20internal%20control) - The effectiveness of any internal control system is subject to inherent limitations, providing reasonable, not absolute, assurances[242](index=242&type=chunk) [PART II - OTHER INFORMATION](index=52&type=section&id=PART%20II%20-%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=52&type=section&id=Item%201.%20Legal%20Proceedings) This section outlines ongoing legal proceedings, primarily concerning 911 taxes and unsolicited phone calls - Bandwidth Inc is a defendant in multiple lawsuits alleging failure to bill, collect, and remit **911 taxes and surcharges**[244](index=244&type=chunk)[245](index=245&type=chunk) - The company is also named in a class action lawsuit regarding alleged failure to block unsolicited phone calls[245](index=245&type=chunk) - Management believes the ultimate resolution of these matters will **not have a material adverse effect** on the company's financial position[151](index=151&type=chunk)[246](index=246&type=chunk) [Item 1A. Risk Factors](index=53&type=section&id=Item%201A.%20Risk%20Factors) This section details significant risks and uncertainties that could adversely affect the company's business [Risk Factors Summary](index=54&type=section&id=Risk%20Factors%20Summary) - Key risks include market competition, customer retention, international operations, the Russia-Ukraine conflict, cybersecurity threats, and various litigations[251](index=251&type=chunk)[252](index=252&type=chunk) - Additional risks relate to the Voxbone acquisition, Convertible Notes, and Class A Common Stock ownership[252](index=252&type=chunk) [Risks Related to Our Business](index=55&type=section&id=Risks%20Related%20to%20Our%20Business) - Future growth depends on factors including competition, pricing, new service offerings, and regulatory conditions[254](index=254&type=chunk)[255](index=255&type=chunk) - The **COVID-19 pandemic** may harm business through decreased spending, lower renewal rates, and delayed sales cycles[256](index=256&type=chunk)[258](index=258&type=chunk) - The market is **highly competitive**, with larger competitors having greater resources, potentially leading to price decreases[261](index=261&type=chunk)[262](index=262&type=chunk) - **Cyberattacks**, including the September 2021 DDoS attack, pose significant risks of service disruption and reputational damage[300](index=300&type=chunk)[303](index=303&type=chunk) - Operating internationally exposes the company to political, regulatory, economic, and staffing risks[294](index=294&type=chunk)[295](index=295&type=chunk)[296](index=296&type=chunk) - The military conflict between **Russia and Ukraine** may adversely affect operations in Europe and increase cyberattack threats[298](index=298&type=chunk)[299](index=299&type=chunk) - The company's revenue is **concentrated** among a limited number of customers[300](index=300&type=chunk) - Failure to protect internally developed systems, technology, and intellectual property could lead to costly litigation[346](index=346&type=chunk)[347](index=347&type=chunk) - The company relies heavily on the continued services of **senior management and key employees**[378](index=378&type=chunk)[379](index=379&type=chunk) [Risks Related to the Acquisition of Voxbone](index=84&type=section&id=Risks%20Related%20to%20the%20Acquisition%20of%20Voxbone) - The anticipated synergies from the Voxbone acquisition may **not be fully realized** due to integration difficulties[418](index=418&type=chunk)[419](index=419&type=chunk) - **Significant non-recurring costs** have been incurred for the acquisition and integration[420](index=420&type=chunk) [Risks Related to the Convertible Notes](index=85&type=section&id=Risks%20Related%20to%20the%20Convertible%20Notes) - Servicing the company's debt requires significant cash flow, and there is a risk that future operations may **not generate sufficient cash**[421](index=421&type=chunk)[422](index=422&type=chunk) - The company may not have the ability to raise necessary funds for cash settlement upon conversion or repurchase of Convertible Notes[423](index=423&type=chunk)[424](index=424&type=chunk) - The accounting method for convertible debt may adversely affect reported financial results and diluted EPS[427](index=427&type=chunk)[429](index=429&type=chunk) - The conditional conversion feature of the Convertible Notes, if triggered, could **adversely affect liquidity**[430](index=430&type=chunk) - Capped call transactions, intended to reduce dilution, may affect the value of the Convertible Notes and Class A common stock[431](index=431&type=chunk)[433](index=433&type=chunk) - The company is exposed to **counterparty risk** with respect to the Capped Calls[435](index=435&type=chunk) [Risks Related to Ownership of Our Class A Common Stock](index=88&type=section&id=Risks%20Related%20to%20Ownership%20of%20Our%20Class%20A%20Common%20Stock) - The trading price of Class A common stock may be **volatile**, potentially leading to investment losses[436](index=436&type=chunk)[438](index=438&type=chunk) - Substantial future sales of Class A common stock by existing stockholders could cause the market price to decline[439](index=439&type=chunk)[458](index=458&type=chunk) - The **dual-class capital structure** concentrates voting control with pre-IPO stockholders[440](index=440&type=chunk)[441](index=441&type=chunk) - **Anti-takeover provisions** in organizational documents and Delaware law could impair or delay takeover attempts[447](index=447&type=chunk)[448](index=448&type=chunk)[449](index=449&type=chunk) - The company does **not intend to pay cash dividends** in the foreseeable future[456](index=456&type=chunk)[457](index=457&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=93&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) This section states there were no unregistered sales of equity securities during the reporting period - No unregistered sales of equity securities occurred during the period[460](index=460&type=chunk) [Item 6. Exhibits](index=93&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the Quarterly Report on Form 10-Q - Exhibits include organizational documents, employment agreements, and certifications from the CEO and CFO[461](index=461&type=chunk) [Signatures](index=94&type=section&id=Signatures) This section contains the duly authorized signatures of the company's CEO and CFO - The report is signed by David A Morken, CEO, and Daryl E Raiford, CFO, on May 6, 2022[463](index=463&type=chunk)[464](index=464&type=chunk)[465](index=465&type=chunk)

Bandwidth Inc. (NASDAQ:BAND) Q1 2022 Earnings Conference Call May 4, 2022 4:30 PM ET Company Participants Sarah Walas – Vice President-Investor Relations David Morken – Chief Executive Officer Daryl Raiford – Chief Financial Officer Conference Call Participants Matt Stotler – William Blair Ryan MacWilliams – Barclays Tyler Radke – Citi Charlie Erlikh – Baird Pat Walravens – JMP Operator Greetings, and welcome to the Bandwidth Inc.’s First Quarter 2022 Earnings Conference Call. At this time, all participants ...

Bandwidth Inc. (NASDAQ:BAND) Q4 2021 Earnings Conference Call February 23, 2022 5:00 PM ET Corporate Participants Sarah Walas - VP of Investor Relations David Morken - Chief Executive Officer Daryl Raiford - Chief Financial Officer Conference Call Participants Halle Mogk - William Blair Mark Murphy - JPMorgan Ryan MacWilliams – Barclays Karan Juvekar - Morgan Stanley George Mohan - KeyBanc Tyler Radke - Citi Catherine Trebnick - Colliers Charlie Erlikh - Baird Joe Goodwin - JMP Securities Quinton Gabrielli ...

Bandwidth Inc. (NASDAQ:BAND) Q3 2021 Earnings Conference Call November 9, 2021 5:00 PM ET Company Participants David Morken – CEO Sarah Walas – VP of Investor Relations Daryl Raiford – CFO Conference Call Participants Matt Stotler – William Blair Mark Murphy – JPMorgan Charlie Erlikh – Baird Klarna – Morgan Stanley George – KeyBanc Tyler Radke – Citi Andrew King – Colliers Securities Ryan Koontz – Needham & Company Quinton – Piper Sandler Pat Walravens – JMP Securities Operator Thank you for standing by and ...

Bandwidth Inc. (NASDAQ:BAND) Q2 2021 Earnings Conference Call August 5, 2021 5:00 PM ET Company Participants Sarah Walas - Vice President of Investor Relations David Morken - Chief Executive Officer Daryl Raiford - Executive Vice President Jeff Hoffman - Chief Financial Officer Conference Call Participants Bhavan Suri - William Blair Charlie Erlikh - Baird Pinjalim Bora - JPMorgan Mike Walkley - Canaccord Genuity Dave Nwokonko - Morgan Stanley Andrew King - Colliers Securities Quinton Gabrielli - Piper Sand ...