Bandwidth(BAND)2023-05-02 16:00Financial Performance - Total revenue for the three months ended March 31, 2023, was $138 million, an increase of 5% compared to $131 million in the same period of 2022[146] - Net income for the three months ended March 31, 2023, was $4 million, a significant improvement from a net loss of $7 million in the same period of 2022[146] - Operating loss for Q1 2023 was $11.8 million, compared to an operating loss of $6.9 million in Q1 2022[164] - Gross profit for the same period was $55.7 million, a slight increase of less than $1 million from $55.4 million in 2022, resulting in a total gross margin of 40%, down from 42%[169] - Non-GAAP gross profit for Q1 2023 was $61,319 thousand, up from $60,921 thousand in Q1 2022, resulting in a Non-GAAP gross margin of 54%, compared to 53% in the previous year[195] - The company reported a net income of $3,611 thousand for Q1 2023, a significant improvement from a net loss of $6,814 thousand in Q1 2022[199] - Non-GAAP net income for Q1 2023 was $1,190 thousand, down from $2,544 thousand in Q1 2022[199] - Adjusted EBITDA for Q1 2023 was $5,059 thousand, a decrease from $8,368 thousand in Q1 2022[201] - Free cash flow for Q1 2023 was $(10,900) thousand, compared to $(12,620) thousand in Q1 2022, indicating improved cash management[204] Revenue Sources - 77% of revenue for the three months ended March 31, 2023, was derived from recurring sources, up from 76% in the same period of 2022[154] - Revenue growth was driven by an 8% increase in core messaging offerings and higher A2P messaging surcharges[167] - Approximately 16% of total revenue was generated outside North America for the quarterly period ended March 31, 2023[213] Expenses and Costs - Gross margin for Q1 2023 was 40%, down from 42% in Q1 2022, with cost of revenue increasing to 60% of total revenue[165] - Total operating expenses rose by $5.1 million, or 8%, to $67.4 million, with research and development expenses increasing by $3.2 million, or 14%[170] - Research and development expenses increased to $25.7 million in Q1 2023, compared to $22.4 million in Q1 2022[164] - Stock-based compensation for Q1 2023 was $7,378 thousand, compared to $5,346 thousand in Q1 2022, reflecting increased compensation expenses[201] Cash Flow and Liquidity - Net cash used in operating activities was $6.4 million for the three months ended March 31, 2023, compared to $6.7 million in the same period in 2022[185] - Net cash provided by investing activities was $29 million, driven by proceeds from the sales and maturities of marketable securities totaling $44 million[188] - Net cash used in financing activities was $52 million, primarily for the repurchase of $65 million aggregate principal amount of the 2026 Convertible Notes[189] - The company anticipates that cash and cash equivalents will be sufficient to meet anticipated cash needs for at least the next 12 months[182] - The company had cash and cash equivalents of $85 million and marketable securities of $38 million as of March 31, 2023, primarily for working capital purposes[210] Taxation - The effective tax rate for Q1 2023 was (647.6)%, significantly lower than (2.7)% in Q1 2022, primarily due to operating losses outside the U.S.[161] - The effective tax rate for the three months ended March 31, 2023, was (647.6)%, compared to (2.7)% in 2022, primarily due to operating losses outside the U.S.[174] - The Non-GAAP effective income tax rate for Q1 2023 was (143.4)%, significantly different from the federal statutory tax rate of 21% due to research and development tax credits[199] Debt and Financing - The company repurchased approximately $65 million of 2026 Convertible Notes for about $51 million, resulting in a gain of $13 million[148] - The company repurchased $65 million of its 2026 Convertible Notes in March 2023, following a $160 million repurchase in November 2022[212] - Future commitments include $425 million in Convertible Notes and a $496 million non-cancelable lease for a new headquarters[183] Internal Controls and Compliance - No changes in internal control over financial reporting were identified during the three months ended March 31, 2023[216] - The company intends to continue monitoring and upgrading internal controls as necessary[217] Legal Matters - The company has been named in multiple lawsuits related to the collection and remittance of 911 taxes and surcharges[220] - Litigation may have an adverse impact on the company due to defense and settlement costs, and diversion of management resources[222] Currency and Investment Activities - A hypothetical 10% adverse change in foreign currency exchange rates would have negatively impacted net income by approximately $0.9 million for the quarterly period ended March 31, 2023[213] - The company does not currently engage in hedging activities to reduce potential exposure to currency fluctuations[213] - The primary objective of investment activities is to preserve principal while maximizing income without significantly increasing risk[211] - The company aims to preserve principal while maximizing income through its investment activities, with no significant exposure to interest rate risks anticipated[211]