Bandwidth(BAND)2023-08-02 16:00Financial Performance - Total revenue for the three months ended June 30, 2023, was $146 million, a 7% increase from $136 million in the same period of 2022[149]. - Net loss for the three months ended June 30, 2023, was $4 million, improved from a net loss of $6 million in the same period of 2022[149]. - Total revenue for the three months ended June 30, 2023, increased by $9 million, or 7%, compared to the same period in 2022, driven by higher usage of core messaging offerings[170]. - For the six months ended June 30, 2023, total revenue increased by $15.865 million, or 6%, compared to the same period in 2022[183]. - The company reported a net cash decrease of $22.6 million for the six months ended June 30, 2023, compared to a decrease of $166.1 million in the same period of 2022[202]. - Non-GAAP gross profit for the six months ended June 30, 2023, was $126.6 million, representing an increase from $121.7 million in the same period of 2022[215]. - Non-GAAP net income for Q2 2023 was $4.4 million, compared to a loss of $0.9 million in Q2 2022, indicating a significant improvement[219]. - The company reported a net loss of $3.89 million for the three months ended June 30, 2023, an improvement from a net loss of $6.25 million in the same period last year[219]. Revenue Sources - 77% of total revenue for the three months ended June 30, 2023, was derived from recurring sources, consistent with the previous year[157]. - Unbilled revenue accounted for 52% of outstanding accounts receivable as of June 30, 2023, compared to 47% in the same period of 2022[158]. - Approximately 15% of total revenue was generated outside North America for the six months ended June 30, 2023[235]. Operating Expenses - Operating expenses for the three months ended June 30, 2023, totaled $66.5 million, an increase from $64.5 million in the same period of 2022[168]. - Total operating expenses for the three months ended June 30, 2023, were $66.474 million, representing 46% of revenue, a decrease from 47% in the same period of 2022[174]. - Research and development expenses for the three months ended June 30, 2023, increased by $588,000, or 2%, compared to the same period in 2022[175]. - Sales and marketing expenses for the three months ended June 30, 2023, increased by $2 million, or 10%, primarily due to higher sales personnel costs[176]. - Total operating expenses for the six months ended June 30, 2023, were $133.883 million, representing 47% of revenue, consistent with the same period in 2022[186]. Tax and Valuation - The effective tax rate for the three months ended June 30, 2023, was (4.1)%, a decrease from 6.3% in the same period of 2022[165]. - The effective tax rate for the six months ended June 30, 2023, was 91.4%, significantly higher than 1.8% in 2022, primarily due to increased operating losses outside the U.S.[190]. - The effective tax rate for the six months ended June 30, 2023, was impacted by a valuation allowance, with an estimated state effective tax rate of 4.3% excluding this allowance[191]. - The Non-GAAP effective income tax rate was 2.8% for the six months ended June 30, 2023, significantly lower than 55.4% for the same period in 2022[220]. - The company expects to maintain a valuation allowance against all U.S. federal and state deferred tax assets until realization becomes more likely than not[192]. Cash Flow and Liquidity - For the six months ended June 30, 2023, net cash used in operating activities was $3 million, with a net cash inflow from operating assets aggregating $3 million[203]. - Cash provided by investing activities for the six months ended June 30, 2023, was $33 million, primarily from sales and maturities of marketable securities[205]. - The company had cash and cash equivalents of $92 million and marketable securities of $31 million as of June 30, 2023, providing a solid liquidity position[232]. - The company reported a net cash used in operating activities of $3.09 million for Q2 2023, down from $7.02 million in Q2 2022[226]. - Free cash flow for Q2 2023 was $(1.23) million, compared to $2.68 million in Q2 2022, indicating cash usage in operations[226]. Debt and Financing - Approximately $65 million of 2026 Convertible Notes were repurchased for about $51 million, resulting in a gain of $13 million recorded in the first half of 2023[152]. - The company entered into a $50 million revolving credit facility on August 1, 2023, with an accordion feature allowing for an increase of up to $25 million[195]. - The company repurchased $65 million of its 2026 Convertible Notes in March 2023, contributing to a net cash used in financing activities of $52 million for the same period[208]. - The company issued $400 million and $250 million in aggregate principal amount of the 2026 and 2028 Convertible Notes, respectively[234]. Legal Matters - The company has been named in multiple lawsuits related to the collection and remittance of 911 taxes and surcharges[241]. - The company intends to vigorously defend against lawsuits alleging failure to bill, collect, and remit certain taxes[243]. Operational Highlights - The company aims to strengthen its position in the communications market through cross-selling, direct-to-enterprise growth, and becoming a preferred provider for SaaS platforms[148]. - The company recognized a gain of $4 million on business interruption insurance recoveries in Q2 2023, contributing to the overall financial results[219]. - Stock-based compensation increased to $8.01 million in Q2 2023 from $4.82 million in Q2 2022, reflecting higher employee incentives[219]. - There were no changes in internal control over financial reporting that materially affected the company during the quarter ended June 30, 2023[238]. - The company does not currently engage in any hedging activity to reduce potential exposure to currency fluctuations[235]. - A hypothetical 10% adverse change in foreign currency exchange rates would have negatively impacted net income by approximately $1.6 million for the six months ended June 30, 2023[235].