Core Insights - Bandwidth Inc. is launching its next-generation Universal Platform at the "Reverb24" event, showcasing advancements in cloud communications technology [1][2] - The event aims to highlight new technologies and partnerships that enable enterprises to deliver seamless global experiences [2] Group 1: Event Details - "Reverb24" is a worldwide livestreamed event scheduled for September 12, 2024, at 10:30 am EDT, with free registration available [1] - The event will feature the launch of Bandwidth's Universal Platform, which includes upgraded capabilities and modernized global network services [2] Group 2: New Technologies and Features - The Universal Platform will introduce new features that facilitate market expansion and consolidation for enterprises [2] - New automation capabilities via APIs and pre-built integrations in the Bandwidth Global Communications Cloud will be showcased [2] - Innovative use cases from Bandwidth customers and partners will be presented [2] - A new method for customers to manage business text messaging campaigns will be introduced [2] - Enhanced capabilities within the Bandwidth Dashboard will streamline operations and management [2] - Future developments in Number Reputation Management and Rich Communication Services (RCS) will be discussed [2] Group 3: Company Overview - Bandwidth Inc. is a global cloud communications software company that provides voice calling, text messaging, and emergency services [3] - The company operates in over 65 countries, covering more than 90 percent of global GDP, and serves major clients including AWS, Cisco, Google, and Microsoft [3] - Bandwidth is recognized as a pioneer in the cloud communications sector, offering a unique combination of APIs, AI capabilities, and a robust owner-operated network [3]

Core Insights - Allegro MicroSystems has launched two new XtremeSense™ TMR sensors, CT455 and CT456, aimed at enhancing high power density designs while improving energy efficiency and reducing costs [1][2][3] Product Features - The CT455 sensor supports two standard field ranges for sensing magnetic fields and translating them into a linear analog output voltage, while the CT456 has a preprogrammed 6 mT field range [2] - These sensors are designed for high-accuracy current measurements on PCB or Busbar applications, capable of measuring currents from 80 A to above 800 A, with optimal performance in the 80-200 A range [2] - The new TMR sensors provide a contactless, non-intrusive solution with a bandwidth of 1 MHz and a response time of 300 ns, facilitating faster power conversion [3] Market Positioning - The launch of CT455 and CT456 marks a significant milestone for Allegro, being the first TMR products introduced since the acquisition of Crocus, reinforcing the company's commitment to TMR technology adoption [3] - Allegro's sensors offer distinct advantages over traditional high-power current sensors, including low noise performance and optimized sensitivity for rapid voltage changes [3] Company Background - Allegro MicroSystems has over three decades of expertise in magnetic sensing and power ICs, focusing on automotive, clean energy, and industrial automation sectors [4]

Core Insights - Bandwidth Inc. is hosting "Reverb24," a global livestream event on September 12, 2024, to unveil its next-generation Universal Platform and showcase new technologies for enterprises [1][2] Group 1: Event Details - The livestream will begin at 10:30 am EDT and is open for free registration [1][2] - The event aims to highlight Bandwidth's advancements in cloud communications and its vision for the future [2] Group 2: Key Features of the Universal Platform - The next-generation Universal Platform will include upgraded capabilities and modernized global network services to facilitate market expansion for enterprises [2] - New automation features via APIs and pre-built integrations will be introduced in the Bandwidth Global Communications Cloud [2] - The event will showcase innovative use cases from Bandwidth's customers and partners [2] - A new method for managing business text messaging campaigns will be presented [2] - Enhanced capabilities within the Bandwidth Dashboard will streamline operations and management [2] - Future developments in Number Reputation Management and Rich Communication Services (RCS) will be discussed [2] Group 3: Company Background - Bandwidth Inc. is a global cloud communications software company that provides voice calling, text messaging, and emergency services across 65+ countries, covering over 90% of global GDP [3] - The company serves major players in unified communications and cloud contact centers, including AWS, Cisco, Google, Microsoft, and others [3] - Bandwidth is recognized as a pioneer in the cloud communications sector, offering a unique combination of APIs, AI capabilities, and a robust regulatory framework [3]

Core Thesis - The company's share price decline of 30% post-Q2 earnings release raises concerns, but the original investment thesis remains valid based on revenue growth, profitability, and balance sheet strength [1] Q2 Results Summary - Q2 revenue reached $174 million, exceeding management's guidance, primarily driven by messaging surcharges, with underlying Cloud communications revenue up 8.4% year-over-year but down sequentially from Q1 [2] - Adjusted EBITDA and free cash flow (FCF) for the quarter were $19 million and $18 million, respectively, resulting in margins of 14.7% and 14.0% of Cloud communications revenue [2] - The Dollar Based Net Retention Rate (DBNRR) improved to 111% from 106% in Q2 2023, attributed to a strategic focus on larger customers [2] Capital Allocation and Debt Management - Management has been prudent in capital allocation, paying down convertible debt maturing in 2026, with only $35 million remaining due by that year, easily covered by current cash [3] - The company has a total debt of $325 million and $75 million in cash, with significant obligations due in 2028 [5] Future Expectations - Management anticipates a 16.7% growth in H2 2024 compared to H2 2023, driven by approximately $14 million in political spending [4] - Historical performance suggests the company may outperform revenue guidance in Q3 and Q4 of election years [4] Valuation Insights - At a share price of $16, the company has a market cap of $432 million and an enterprise value of $682 million, with attractive EV to EBITDA and Price to FCF multiples of 9.2 and 8.6, respectively [6] - Compared to peers like Twilio, which have higher Price to FCF multiples, the current valuation appears favorable given the growth outlook [6] Conclusion - Despite the share price drop, the underlying metrics remain strong, and the focus on profitability is seen as a strategic move [7]

Financial Performance - For the three months ended June 30, 2024, total revenue was $174 million, representing a 19% increase from $146 million in the same period of 2023[128]. - Net income for the three months ended June 30, 2024, was $4 million, compared to a net loss of $4 million in the same period of 2023[128]. - For the six months ended June 30, 2024, total revenue was $345 million, reflecting a 21% increase from $284 million in the same period of 2023[128]. - For the three months ended June 30, 2024, total revenue increased by $27.7 million, or 19%, to $173.6 million compared to the same period in 2023[150]. - Cloud communications revenue rose by $10 million, or 8%, driven by higher sales of messaging and political messaging related to the upcoming U.S. presidential election[150]. - Revenue from messaging surcharges increased by $18 million, or 65%, due to higher messaging traffic and new carrier fees[151]. - For the six months ended June 30, 2024, total revenue increased by $60.9 million, or 21%, to $344.6 million compared to the same period in 2023[161]. Profitability and Margins - Gross profit for the three months ended June 30, 2024, was $64.8 million, reflecting a $5.9 million increase from the same period in 2023[152]. - Total gross margin percentage for the six months ended June 30, 2024, was 38%, a decline of 2% compared to the same period in 2023[165]. - Non-GAAP net income for the three months ended June 30, 2024, was $8,719, compared to $4,399 for the same period in 2023, representing a 98.5% increase[196]. - Adjusted EBITDA for the three months ended June 30, 2024, was $18,741, up from $10,568 in the same period of 2023, indicating a 77.5% growth[202]. - Free cash flow for the three months ended June 30, 2024, was $18,320, compared to a negative $1,228 for the same period in 2023, showing a significant turnaround[205]. Expenses and Costs - Total cost of revenue for the three months ended June 30, 2024, increased by $21.9 million, or 25%, to $108.8 million[152]. - Total operating expenses for the three months ended June 30, 2024, were $70.9 million, up $4.4 million, or 7%, compared to the same period in 2023[154]. - Research and development expenses increased by $3.3 million, or 13%, primarily due to higher facilities and depreciation expenses[155]. - Total operating expenses for the six months ended June 30, 2024, were $146.8 million, representing 43% of revenue, down from 47% in the same period in 2023[166]. - Research and development expenses increased by $7 million, or 13%, for the six months ended June 30, 2024, compared to the same period in 2023[167]. - Sales and marketing expenses rose by $4 million, or 9%, for the six months ended June 30, 2024, compared to the same period in 2023[167]. - General and administrative expenses increased by $2 million, or 6%, for the six months ended June 30, 2024, compared to the same period in 2023[167]. Cash Flow and Liquidity - As of June 30, 2024, the company had cash and cash equivalents of $62 million and marketable securities of $14 million[173]. - Net cash provided by operating activities was $27 million for the six months ended June 30, 2024, compared to a cash outflow of $3.3 million in the same period in 2023[179]. - Net cash used in investing activities was $5 million for the six months ended June 30, 2024, primarily for the purchase of property, plant, and equipment[184]. - Net cash used in financing activities was $91 million for the six months ended June 30, 2024, mainly due to $128 million used for the 2024 Repurchases[185]. Debt and Financing - The company repurchased approximately $140 million of 2026 Convertible Notes for an aggregate cash price of approximately $128 million in May 2024[129]. - The credit agreement was amended to increase revolving credit commitments from $50 million to $100 million, with a maturity date extended to May 1, 2029[131]. - The company increased its Credit Facility from $50 million to $100 million on May 1, 2024, with an applicable weighted average interest rate of 7.94% and $40 million in outstanding borrowings[212]. - The company has $35 million and $250 million outstanding from its 2026 and 2028 Convertible Notes, respectively, with no exposure to interest rate changes due to fixed annual interest rates[213]. Taxation - The effective tax rate for the three months ended June 30, 2024, was (8.9)%, compared to (4.1)% in the same period of 2023[144]. - The effective tax rate for the six months ended June 30, 2024, was 9.3%, a significant decrease from 91.4% in 2023[169]. - The Non-GAAP effective income tax rate for the six months ended June 30, 2024, was 15.0%, significantly lower than the federal statutory tax rate of 21% due to research and development tax credits[198]. Legal Matters - The company is involved in multiple lawsuits regarding the failure to bill, collect, and remit certain taxes and surcharges associated with 911 services[222]. - The company intends to vigorously defend against the lawsuits and believes it has meritorious defenses[222]. - The company may face ongoing legal actions and claims related to number management and billing, employment-related issues, and customer misuse of offerings[223]. - Future litigation may be necessary to defend proprietary rights and recover amounts owed[223]. - The outcomes of current or future litigation cannot be predicted with certainty, potentially leading to adverse impacts[223]. - Litigation can incur defense and settlement costs, divert management resources, and affect overall operations[223]. Internal Controls - There were no changes in internal control over financial reporting that materially affected the company during the quarter ended June 30, 2024[218]. - The effectiveness of the company's internal control over financial reporting is subject to inherent limitations, and improvements may be necessary[219].

Core Insights - Bandwidth, Inc. (BAND) reported strong second-quarter 2024 results, with both revenue and net income exceeding Zacks Consensus Estimates, driven by increased enterprise reliance on its cloud communications platform [1][2] - The company aims to capture large enterprise clients and establish itself as the leading global CPaaS platform, focusing on profitability and cash flow generation [1] Financial Performance - For Q2 2024, Bandwidth reported a GAAP net loss of $5 million, or 17 cents per share, compared to a loss of $3.89 million, or 15 cents per share, in the same quarter last year, attributed to higher costs [2] - Non-GAAP net income was $9 million, or 29 cents per share, up from $4.71 million, or 16 cents per share, year-over-year, beating the consensus estimate by a penny [2] - Quarterly revenues increased to $173.6 million from $145.9 million in the prior-year quarter, surpassing the consensus estimate of $173 million, driven by high demand for digital engagement and messaging services [2] Revenue Breakdown - Revenues from cloud communication reached $128.4 million, an 8% year-over-year increase, although it fell short of the estimate of $144.3 million [3] Operational Metrics - Non-GAAP gross margin improved to 56%, up from 55% a year ago, due to a favorable product mix and operational efficiency [4] - Adjusted EBITDA was $18.7 million, significantly above guidance and up from $10.6 million in the prior-year period [4] Cash Flow and Liquidity - In the first half of 2024, the company generated $26.9 million in cash from operations, compared to a cash utilization of $3.3 million in the prior year [5] - As of June 30, 2024, cash and cash equivalents stood at $62 million, with convertible senior notes totaling $280.66 million [5] Future Guidance - For the full year 2024, Bandwidth expects revenues between $710 million and $720 million, with adjusted EBITDA projected in the range of $72 million to $76 million [6] - For Q3 2024, revenues are anticipated to be between $180 million and $184 million, with adjusted EBITDA expected to be between $18 million and $20 million [6]

Financial Data and Key Metrics Changes - Bandwidth reported total revenue of $174 million, up 19% year-over-year, exceeding the midpoint of guidance [17] - Adjusted EBITDA reached $19 million, a 77% increase from the prior year, surpassing the high end of guidance [17] - Free cash flow was $18 million, significantly higher than the first quarter and nearly $20 million over last year's quarter [17][21] Business Line Data and Key Metrics Changes - Cloud communications revenue was $128 million, up 8% year-over-year, with messaging surcharges contributing $45 million [18] - Messaging revenue grew 33% year-over-year, driven by strong demand from new and existing customers across various verticals [18] - Revenue from global communications plans grew 2% year-over-year, while programmable services revenue increased by 31% [19] Market Data and Key Metrics Changes - The net retention rate improved to 111%, up 5 percentage points from the previous year [20] - The net retention rate for customers with over $100,000 ARR grew to 113%, indicating strong value and durability of offerings [20] - Average revenue per user (ARPU) climbed to a record $198,000, reflecting success in attracting large enterprises [21] Company Strategy and Development Direction - The company focuses on expanding profitability and creating software innovations like Maestro and AIBridge [6] - Bandwidth aims to capitalize on the growing demand for cloud contact centers and unified communications [8][12] - The company is enhancing its global communications cloud to provide a competitive advantage in the market [6][12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in achieving sustainable, profitable growth and optimizing capital structure [16][23] - The outlook for full-year revenue is approximately $715 million, with adjusted EBITDA projected at $74 million, a 54% improvement over 2023 [23] - Management highlighted the importance of voice as a durable interface for customer service, even with the rise of AI [12][30] Other Important Information - Devesh Agarwal was appointed Interim Chief Operating Officer, expected to enhance operational efficiency and innovation [15] - The company has successfully reduced its outstanding balance of 2026 convertible notes, contributing to a healthier capital structure [22] Q&A Session Summary Question: What are the drivers behind the increase in net retention rate? - The increase is broad-based, driven by commercial messaging customers and enterprise customers, with successful onboarding of new enterprise clients [26][27] Question: How does AI impact the channel mix in contact centers? - Management believes voice will remain a primary channel, supported by the integration of AI technologies [29][30] Question: Was the decision to reiterate EBITDA and revenue guidance conservative? - The strong first half performance has reinforced confidence in the raised full-year outlook, though some conservatism is acknowledged [32][35] Question: How did usage volumes trend throughout the quarter? - Volumes were strong leading into the third quarter, with commercial messaging and enterprise customers showing expected usage patterns [36][37] Question: What is the growth outlook for messaging? - Messaging growth is expected to remain strong, with seasonal factors influencing some fluctuations [68] Question: How does Bandwidth compare to AWS? - The analogy highlights Bandwidth's pioneering role in cloud-based communication services, though it acknowledges that Bandwidth is not yet at AWS's scale [48][50] Question: What is the current competitive landscape? - The competitive landscape remains stable, with no new entrants, and Bandwidth maintains a cost advantage due to its vertically integrated platform [60][62]

| --- | --- | --- | |-------|-------|-------| | | | | | | | | Legal Disclaimer 1 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 September 30, 2024 and year ending December 31, 2024, the success of our product offerings and our platform, and the value proposition of our products, are forward-looking statements. The wor ...

Company Performance - Bandwidth reported quarterly earnings of $0.29 per share, exceeding the Zacks Consensus Estimate of $0.28 per share, and up from $0.16 per share a year ago, representing an earnings surprise of 3.57% [1] - The company posted revenues of $173.6 million for the quarter ended June 2024, surpassing the Zacks Consensus Estimate by 0.07%, and an increase from $145.87 million year-over-year [1] - Bandwidth has consistently surpassed consensus EPS and revenue estimates over the last four quarters [1] Stock Performance - Bandwidth shares have increased approximately 57.7% since the beginning of the year, significantly outperforming the S&P 500's gain of 15.8% [2] Earnings Outlook - The current consensus EPS estimate for the upcoming quarter is $0.31 on revenues of $177.74 million, and for the current fiscal year, it is $1.31 on revenues of $715.6 million [4] - The estimate revisions trend for Bandwidth is currently unfavorable, resulting in a Zacks Rank 4 (Sell), indicating expected underperformance in the near future [4] Industry Context - The Communication - Infrastructure industry, to which Bandwidth belongs, is currently ranked in the bottom 27% of over 250 Zacks industries, suggesting potential challenges ahead [5] - Anterix, another company in the same industry, is expected to report a quarterly loss of $0.45 per share, reflecting a year-over-year change of -309.1%, with its consensus EPS estimate revised 9.7% lower in the last 30 days [5][6]

Financial Performance - Bandwidth reported revenue of $174 million for Q2 2024, representing a 19% increase year-over-year from $146 million in Q2 2023[1][6] - The company's Adjusted EBITDA reached $19 million, up 77% from $11 million in the prior year[6] - Free Cash Flow for Q2 2024 was $18 million, a significant improvement from a negative $1 million in Q2 2023[5][6] - Revenue for the three months ended June 30, 2024, was $173.6 million, a 19% increase from $145.9 million in the same period of 2023[24] - Gross profit for the six months ended June 30, 2024, was $130.3 million, compared to $114.6 million for the same period in 2023, reflecting a 13.6% increase[24] - Net income for the three months ended June 30, 2024, was $4.1 million, compared to a net loss of $(3.9) million in the same period of 2023[24] - Non-GAAP net income for Q2 2024 was $8,719,000, up from $4,399,000 in Q2 2023, reflecting a 97.5% increase[35] - Net income for Q2 2024 was $4,055,000, a turnaround from a net loss of $3,890,000 in Q2 2023[35] Guidance and Expectations - Bandwidth provided guidance for Q3 2024 revenue between $180 million and $184 million, and full-year 2024 revenue guidance of $710 million to $720 million[9] - The company expects Adjusted EBITDA for Q3 2024 to be between $18 million and $20 million, and for the full year 2024 between $72 million and $76 million[9] Operational Efficiency and Strategic Initiatives - Bandwidth's strategic investments and disciplined financial management have driven impressive operational efficiency and cash flow generation[6] - New product innovations like Maestro and AI Bridge are contributing to strong performance in a competitive market[3][6] - Bandwidth secured several key customers in the healthcare and insurance sectors, enhancing its market position and service offerings[7][8] - The company is focused on sustainable, profitable growth and is well-positioned to continue its momentum into the second half of the year[6] Cost and Expenses - Gross Margin for Q2 2024 was 37%, down from 40% in Q2 2023, while Non-GAAP Gross Margin improved to 56% from 55%[5][6] - Research and development expenses for the six months ended June 30, 2024, increased to $57.0 million from $50.5 million in the same period of 2023, a 12.9% rise[24] - Stock-based compensation expense of $23.7 million for the six months ended June 30, 2024, compared to $15.4 million in the same period of 2023[25] - Stock-based compensation for Q2 2024 was $11,360,000, up from $8,005,000 in Q2 2023[35] Cash Flow and Assets - The company recognized a net cash provided by operating activities of $26.9 million for the six months ended June 30, 2024, compared to $(3.3) million in the same period of 2023[29] - Total current assets decreased to $181.4 million as of June 30, 2024, from $252.8 million in 2023[26] - Cash and cash equivalents at the end of the period were $62.3 million, down from $92.0 million in the same period of 2023[29] Liabilities and Debt - Total liabilities decreased to $694.7 million as of June 30, 2024, from $803.7 million in 2023[26] - The company reported a net gain on extinguishment of debt of $(10,267,000) in Q2 2024, compared to no gain in Q2 2023[35] Shareholder Information - The weighted average number of diluted shares outstanding increased to 30,813,973 in Q2 2024 from 28,899,655 in Q2 2023[35]