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]

Financial Performance - Total revenue for 1Q25 was $752 million[15] - Cloud communications revenue for 1Q25 reached $545 million[15] - Adjusted EBITDA for 1Q25 grew by 50% year-over-year to $88 million[15] - Free cash flow for 1Q25 increased by 94% year-over-year to $50 million[15] - The company is raising full year 2025 total revenue growth guidance to 9-11% when normalized for 2024 cyclical political campaign revenue[36, 37] Revenue Growth - Total revenue grew by 7% year-over-year in 1Q25[18] - Cloud communications revenue grew by 6% year-over-year in 1Q25[18] - Enterprise Voice revenue grew by 26% year-over-year[19] Customer Metrics - Net Retention Rate (NRR) was 116%[12, 23] - Average annual customer revenue increased by 20% year-over-year[23] Gross Margin - Non-GAAP gross margin increased to 59%[44]

Financial Performance - First quarter 2025 revenue reached $174 million, exceeding guidance and showing a year-over-year increase from $171 million[1][4] - Adjusted EBITDA for Q1 2025 was $22 million, representing a 40% increase compared to $16 million in Q1 2024[4] - Bandwidth raised its full-year revenue guidance to a range of $745 million to $760 million, reflecting 9% to 11% year-over-year growth[9][10] - The company anticipates $178 million to $180 million in revenue for Q2 2025[10] - Revenue for the three months ended March 31, 2025, was $174,241 thousand, an increase of 1.3% from $171,033 thousand in the same period of 2024[25] - Gross profit increased to $71,512 thousand, representing a gross profit margin of 41%, up from 38% in the prior year[30] - Non-GAAP net income for the three months ended March 31, 2025, was $11,130 thousand, compared to $7,820 thousand in the same period of 2024[32] - Adjusted EBITDA for the quarter was $22,213 thousand, an increase from $15,923 thousand in the prior year[34] Loss and Cash Flow - Bandwidth reported a net loss of $4 million in Q1 2025, an improvement from a net loss of $9 million in Q1 2024[4] - Free cash flow for Q1 2025 was $(13) million, compared to $(4) million in Q1 2024[4] - Net loss for the quarter was $3,740 thousand, significantly improved from a net loss of $9,233 thousand in the same quarter of 2024[29] - Free cash flow for the quarter was $(13,295) thousand, compared to $(4,407) thousand in the same period of 2024[35] - Cash and cash equivalents at the end of the period were $36,155 thousand, down from $105,565 thousand at the end of the same quarter in 2024[29] Operational Highlights - The company is focusing on AI-powered communications through its Maestro platform, enhancing integration and infrastructure modernization for enterprises[2] - Bandwidth secured several new customer engagements, including a prominent healthcare provider and a publicly traded hospital group, highlighting its capabilities in cloud voice services and AI integration[13] - The company is actively participating in market expansion and strategic initiatives, as evidenced by its upcoming investor conference and updated investor presentation[11][12] Balance Sheet - Total current assets decreased to $151,412 thousand from $187,812 thousand as of December 31, 2024[27] - Total liabilities decreased to $618,968 thousand from $676,633 thousand as of December 31, 2024[27] - Stock-based compensation expense totaled $13,575 thousand, up from $12,339 thousand in the prior year[29] Gross Margin - Gross margin improved to 41% in Q1 2025, up from 38% in Q1 2024, while non-GAAP gross margin increased to 59% from 57%[4]

Core Viewpoint - Bandwidth Inc. announced its financial results for the first quarter ended March 31, 2025, highlighting its position as a leading global enterprise cloud communications company [1]. Company Overview - Bandwidth Inc. is a global cloud communications software company that provides voice calling, text messaging, and emergency services to enterprises [4]. - The company operates in over 65 countries and covers more than 90 percent of global GDP, serving major clients such as Amazon Web Services, Cisco, Google, Microsoft, and others [4]. - Bandwidth is recognized as the first and only global Communications Platform-as-a-Service (CPaaS) provider, offering a unique combination of composable APIs, AI capabilities, and a proprietary network [4]. Conference Call Details - A live webcast to discuss the financial results was scheduled for May 7, 2025, at 8:00 AM Eastern Time, with access available on the investor relations website [2]. - Dial-in numbers for the conference call were provided for both domestic and international participants [3]. - A replay of the conference call will be available until May 14, 2025, with specific dial-in information for accessing the replay [3].

Core Insights - Bandwidth Inc. is hosting The Texties, an award series recognizing excellence in business text messaging, with nominations open until May 21, 2025 [1][4] - The awards aim to highlight innovative messaging solutions that create significant business outcomes and transform industries [3][4] - Last year's winners demonstrated the effectiveness of messaging in various sectors, and this year’s awards seek to elevate the recognition of impactful messaging strategies [3] Company Overview - 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 [5] - The company serves a wide range of clients, including major tech firms like Amazon Web Services, Cisco, Google, and Microsoft, as well as Global 2000 enterprises and SaaS companies [5] - 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 [5] Award Criteria - The Texties will evaluate nominations based on measurable business impact, market differentiation, strategic adaptability, technological innovation, and contributions to social good and accessibility [7]

Growth and Market Challenges - The company has experienced significant growth since inception but cannot guarantee the same pace of growth in the future due to various uncontrollable factors [101]. - Economic conditions, including high inflation and interest rates, have impacted the company's financial health and may compress gross margins [105]. - The company is vulnerable to changes in market preferences and economic instability, which could lead to reduced customer demand and longer collection cycles [106]. - The competitive landscape is intensifying, with larger competitors having greater resources and the ability to bundle services at lower costs [110]. - Attracting new customers in a cost-effective manner is crucial for growth, and rising marketing costs could hinder this effort [115]. - The market for the company's services is relatively new and unproven, and its growth depends on customer adoption and recognition of the platform's benefits [116]. - The company faces challenges in expanding sales to enterprise customers, including lengthy sales cycles and the need for extensive customer education [120]. - If the company cannot increase revenue from enterprise customers, its financial condition may be adversely affected [119]. - The company emphasizes the importance of developing enhancements and new services to attract new customers and increase revenue from existing customers [122]. Operational Risks - The company relies on key vendors for materials and services, and any disruption could adversely affect operations and increase costs [107]. - The complexity of pricing and billing systems poses risks, as errors could adversely affect revenue and profitability [135]. - The company faces challenges in maintaining high-quality customer support, which is essential for customer retention and reputation [141]. - The company must manage inflationary pressures effectively to avoid negative impacts on operating results and cash flows [105]. - The company’s operations depend on the reliability of its systems; failures could disrupt service delivery and negatively impact customer confidence [201]. International Operations and Regulatory Risks - The company has experienced substantial international expansion, including the acquisition of Voxbone in late 2020, which is critical for future growth [132]. - International operations expose the company to legal, regulatory, economic, and political risks that could disrupt trade and service sales [143]. - The gross margin for international customers may be lower than for domestic customers, potentially affecting overall gross margin as operations expand [145]. - The company must comply with various international regulations, which may increase operational costs and limit service offerings in certain jurisdictions [176]. - Regulatory uncertainties in the communications industry may slow the company's growth and have a material adverse effect on its business and financial condition [164]. - Changes in regulations or delays in obtaining necessary regulatory approvals could adversely affect the company's operations and growth prospects [164]. - The company is subject to evolving data protection laws, which may increase compliance costs and operational complexities [178]. - Noncompliance with FCC regulations could lead to significant fines and operational disruptions, adversely affecting financial performance [170]. Financial and Taxation Risks - A significant portion of the company's revenue is concentrated among a limited number of customers, which poses a risk if any of the top ten customers significantly decrease orders [149]. - Tax liabilities related to sales, use, and telecommunications taxes may adversely affect the company's results of operations [223]. - The company may experience increased costs due to additional fees imposed by network providers, impacting gross margins [214]. - The company is exposed to potential audits by taxing authorities, which could result in significant financial impacts if found non-compliant [225]. - Future tax reforms could increase the estimated tax liability and affect the company's financial position and effective tax rates [228]. - The OECD's framework for a 15% global minimum tax may lead to changes in tax laws that could increase the company's tax liabilities [229]. Cybersecurity and Legal Risks - The company faces risks related to cyber-attacks, which could lead to service degradation, data loss, and significant additional costs to maintain network security [150][154]. - The company is currently subject to litigation regarding the billing and remittance of non-income-based taxes related to 911 services, which could adversely affect its results of operations [158]. - The company faces potential litigation and regulatory enforcement actions due to customer misuse of its services, which could damage its reputation and result in significant liabilities [159][160]. - The company has experienced increased scrutiny and correspondence from regulatory bodies like the FTC and FCC regarding its role in transmitting unauthorized calls [160]. - The company’s existing insurance policies may not fully cover liabilities arising from cyber incidents or security breaches, potentially impacting its financial condition [157]. Management and Structural Risks - The company has terminated its service offerings in Russia and Belarus due to significant sanctions and export controls imposed in response to the military conflict between Russia and Ukraine [147]. - The company’s ability to maintain its corporate culture during expansion is crucial for future success and operational efficiency [132]. - The loss of key management personnel could significantly delay the achievement of strategic objectives and adversely affect business performance [216]. - The dual class structure of the company's common stock concentrates voting control, limiting other stockholders' influence on corporate matters [269]. - The concentration of ownership by the CEO may lead to conflicts of interest that could adversely affect the trading price of Class A common stock [273]. Capital and Investment Risks - The company anticipates needing additional capital in the future, which may not be available on favorable terms, potentially affecting growth plans [283]. - The company has incurred substantial debt, which may increase risks related to its financial condition and ability to make payments on the Convertible Notes [253]. - The company may not have sufficient funds for cash settlement upon conversion of the Convertible Notes, potentially leading to defaults [254]. - The conditional conversion feature of the Convertible Notes could adversely affect the company's liquidity if triggered [255]. - The company has entered into capped call transactions to reduce potential dilution upon conversion of the Convertible Notes [256]. Market and Economic Conditions - Customer churn rates may increase due to economic changes, competition, and service quality issues, adversely affecting revenue growth [210]. - Market prices for certain services have decreased, impacting anticipated revenue and necessitating potential price reductions to remain competitive [211]. - The company is exposed to foreign currency exchange rate fluctuations, which could impact its financial condition and results of operations [239]. - The company does not currently hedge transactional exposures in foreign currencies, which may expose it to additional risks [241].

4Q24 and 2024 Earnings Results February 20, 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 March 31, 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," "a ...

Financial Data and Key Metrics Changes - Total revenue increased by 27% to $210 million in Q4 2024, with cloud communications revenue reaching $144 million, a 15% year-over-year increase [25] - Non-GAAP gross margin improved to 58%, a three-percentage point increase [25] - EBITDA grew by 25% to $23 million [25] - Full year 2024 total revenue reached $748 million, a 25% increase year-over-year [26] - Free cash flow saw a significant increase of 130%, reaching $30 million in Q4 2024 [25] Business Line Data and Key Metrics Changes - Enterprise voice revenue grew 29% year-over-year, driven by strong demand within key verticals [28] - Programmable messaging accounted for 23% of cloud communications revenue and saw a 46% year-over-year increase [30] - Global voice plans met expectations with 3% revenue growth year-over-year [29] Market Data and Key Metrics Changes - Political campaign messaging contributed $62 million to total revenue and $23 million to cloud communications revenue for the full year [27] - Net retention rate for full year 2024 was 122%, and customer name retention remained well above 99% [30] Company Strategy and Development Direction - The company is focused on capitalizing on the massive opportunity in enterprise communications, particularly in voice AI [9] - The strategy includes investing in business, achieving profitable growth, and strengthening capital structure [33] - The company aims to maintain its leadership in cloud communications and AI voice orchestration [29][30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the growth potential of voice AI and its transformative impact on enterprise communications [61] - The 2025 guidance reflects expected revenue of $740 million to $760 million, indicating growth of 8% to 11% when normalized for 2024 cyclical political campaign revenue [34] - Management noted that the AI agent opportunity is seen as a durable market shift, unlike temporary trends [61] Other Important Information - The company completed a repurchase of nearly $30 million of the 2026 notes, indicating strong balance sheet management [70] - The promotion of Devesh Agarwal to Chief Operating Officer is expected to enhance operational excellence and customer partnerships [21] Q&A Session Summary Question: What played out in the fourth quarter excluding political revenue? - Management indicated that cloud communications revenue grew 15% in Q4, and when excluding political campaign revenue, it grew approximately 7% [40] Question: What are the growth rates expected across core segments in 2025? - Management expects sturdy growth across global voice plans, enterprise voice, and programmable messaging, with global voice plans anticipated to grow more than in 2024 [43][44] Question: How is demand for voice AI agents evolving? - Management noted that enterprise customers are actively making decisions regarding AI agents, with significant examples already in use [55] Question: What is the outlook for the first quarter? - The first quarter guidance is $169 million at the midpoint, which is flat year-over-year but up 4% when normalized for political campaign benefits [58] Question: What are the long-term prospects around debt? - Management highlighted that the company has manageable leverage, with a net debt balance running just under 2.0% of EBITDA [70] Question: How is Maestro performing in terms of customer adoption? - Hundreds of enterprise customers are using Maestro, with significant annual spending, indicating strong traction [78] Question: What is the impact of AI on messaging volumes? - The company has implemented AI solutions that expedite campaign registration approvals, contributing to messaging growth [89]

Financial Performance - Bandwidth reported record revenue of $210 million for Q4 2024, a 27% increase from $165 million in Q4 2023, and full-year revenue of $748 million, up 24% from $601 million in 2023[6]. - Adjusted EBITDA for Q4 2024 was $23 million, a 21% increase from $19 million in Q4 2023, and for the full year, it rose to $82 million, a 70% increase from $48 million[6]. - Revenue for Q4 2024 was $209.97 million, a 27% increase from $165.39 million in Q4 2023[26]. - Gross profit for the year ended December 31, 2024, reached $279.96 million, up from $236.16 million in 2023, reflecting a gross profit margin of 37%[26][32]. - Operating loss for Q4 2024 was $2.67 million, significantly improved from a loss of $10.04 million in Q4 2023[26]. - Net loss for the year ended December 31, 2024, was $6.52 million, compared to a net loss of $16.34 million in 2023[26]. - Non-GAAP net income for Q4 2024 was $11.564 million, compared to $10.824 million in Q4 2023, representing an increase of 6.8%[33]. - The net loss for the year ended December 31, 2024, was $6.524 million, an improvement from a net loss of $16.343 million in 2023[33]. Cash Flow and Assets - The company achieved a net operating cash flow of $84 million for the full year 2024, compared to $39 million in 2023, and recorded free cash flow of $59 million, up from $19 million[6]. - Cash and cash equivalents decreased to $81.81 million as of December 31, 2024, down from $131.99 million in 2023[28]. - Total assets decreased to $989.17 million in 2024 from $1.10 billion in 2023[28]. - The company reported a net cash provided by operating activities of $83.88 million for the year 2024, a significant increase from $39.00 million in 2023[31]. - Net cash provided by operating activities for the year ended December 31, 2024, was $83.883 million, up from $39.001 million in 2023[35]. Margins and Expenses - Non-GAAP gross margin for Q4 2024 was 58%, compared to 55% in Q4 2023, and for the full year, it was 57%, up from 55% in 2023[6]. - Research and development expenses increased to $118.63 million for the year 2024, up from $104.19 million in 2023[26]. - The company recognized total stock-based compensation expense of $48.36 million for the year ended December 31, 2024, compared to $36.99 million in 2023[26]. - Stock-based compensation for the year ended December 31, 2024, totaled $48.362 million, compared to $36.992 million in 2023, indicating a rise of 30.7%[33]. - The total depreciation expense for the year ended December 31, 2024, was $31.739 million, compared to $24.443 million in 2023, reflecting an increase of 29.9%[34]. Future Outlook - Bandwidth provided revenue guidance for 2025, projecting an 8% to 11% year-over-year growth, with expected revenue of $740 million to $760 million[8]. - The company noted that political campaign messaging activity contributed approximately $8 million in Q1 2024 and $62 million for the full year 2024, which may impact future revenue growth[8]. - Bandwidth's CEO highlighted the strong customer adoption of Voice AI and enterprise-grade solutions, indicating a positive outlook for market leadership in 2025[4]. - The company is focused on AI-driven product innovation and expanding its market presence to unlock new value for customers[4]. Recognition and Contracts - Bandwidth was recognized as a Leader in the IDC MarketScape: Worldwide CPaaS 2025 Vendor Assessment for the fourth consecutive time[12]. - The company secured significant contracts, including a Fortune 25 healthcare company and a global cruise line, for cloud contact center services[12]. Shareholder Information - The weighted average number of shares outstanding for basic and diluted shares increased to 27,882,092 in Q4 2024 from 25,829,587 in Q4 2023[33]. - The Non-GAAP effective income tax rate for the year ended December 31, 2024, was 18.1%, compared to 10.1% in 2023[33]. - The company reported a net gain on extinguishment of debt of $10.267 million for the year ended December 31, 2024[34].

Financial Performance - For the three months ended September 30, 2024, total revenue was $194 million, an increase of 28% compared to $152 million in the same period of 2023[118]. - Net income for the three months ended September 30, 2024, was less than $1 million, improving from a net loss of $5 million in the same period of 2023[118]. - For the nine months ended September 30, 2024, total revenue reached $539 million, representing a 24% increase from $436 million in the same period of 2023[118]. - For the three months ended September 30, 2024, total revenue was $193.883 million, an increase of $41.870 million or 28% compared to $152.013 million in the same period in 2023[141]. - Cloud communications revenue increased by $18.608 million or 15% to $138.826 million, while messaging surcharges rose by $23 million or 73% to $55.057 million[141][142]. - Revenue from messaging surcharges rose by $60 million, or 73%, for the nine months ended September 30, 2024, primarily due to increased messaging volumes[155]. - Total revenue for the nine months ended September 30, 2024, was $538 million, an increase of $102 million, or 24%, compared to $436 million in the same period in 2023[154]. - Total cost of revenue increased by $73 million, or 28%, to $335 million for the nine months ended September 30, 2024, influenced by higher pass-through messaging surcharges[156]. - Gross profit for the nine months ended September 30, 2024, was $203 million, up $29 million, or 17%, from $174 million in the same period in 2023[156]. Operating Expenses - Total operating expenses for the three months ended September 30, 2024, were $74.032 million, an increase of $8.386 million or 13% compared to $65.646 million in 2023[143]. - Research and development expenses rose by $5 million or 22% to $30.171 million, driven by higher headcount expenses[145]. - Sales and marketing expenses increased by $1 million or 5% to $26.285 million, also due to higher headcount expenses[146]. - General and administrative expenses increased by $1.733 million or 11% to $17.576 million, driven entirely by higher headcount expenses[146]. - Total operating expenses increased by $21 million, or 11%, to $221 million for the nine months ended September 30, 2024, with operating expenses as a percentage of revenue decreasing from 46% to 41%[158]. - Research and development expenses rose by $12 million, or 16%, to $87 million for the nine months ended September 30, 2024, primarily due to higher facilities expenses[157]. Profitability Metrics - Gross profit increased by $13.635 million or 23% to $73.134 million, resulting in a gross margin of 38%, down from 39% in the prior year[143]. - Non-GAAP gross profit for Q3 2024 was $80,142 thousand, up from $65,696 thousand in Q3 2023, representing a 22% increase[182]. - Non-GAAP gross margin for Q3 2024 was 58%, compared to 55% in Q3 2023, indicating a 3 percentage point improvement[182]. - Non-GAAP net income for Q3 2024 was $12,791 thousand, significantly higher than $6,347 thousand in Q3 2023, reflecting a 102% increase[187]. - Adjusted EBITDA for the three months ended September 30, 2024, was $23,971,000, up from $13,758,000 in the prior year, representing a 74% increase[193]. - Non-GAAP gross profit for the nine months ended September 30, 2024, was $224,582 thousand, compared to $192,338 thousand for the same period in 2023, a 17% increase[182]. Cash Flow and Liquidity - As of September 30, 2024, the company had cash and cash equivalents of $75 million and marketable securities of $5 million[166]. - Net cash provided by operating activities was $47 million for the nine months ended September 30, 2024, compared to $19 million in the same period in 2023[172]. - Net cash provided by operating activities for the three months ended September 30, 2024, was $20,464,000, down from $23,001,000 in the same period last year[196]. - Free cash flow for the three months ended September 30, 2024, was $14,245,000, compared to $18,190,000 for the same period in 2023, reflecting a decrease of 16%[196]. - The company expects its cash, cash equivalents, and marketable securities, along with cash flows from operations, to be sufficient for anticipated cash needs for at least the next 12 months[169]. Debt and Financing - The company repurchased approximately $140 million of 2026 Convertible Notes for about $128 million in cash, resulting in a gain of $10 million recorded in net gain on extinguishment of debt[119][120]. - The company increased its revolving credit commitments from $50 million to $100 million as of May 1, 2024[121]. - As of September 30, 2024, the applicable weighted average interest rate on the Credit Facility was 7.71%, with $25 million in outstanding borrowings[122]. - The company increased its Credit Facility from $50 million to $100 million on May 1, 2024, with a weighted average interest rate of 7.71% as of September 30, 2024[203]. - The company carries the Convertible Notes at face value less unamortized discount on its balance sheet[204]. Taxation - The effective tax rate for the three months ended September 30, 2024, was 228.7%, significantly higher than 4.1% in the same period of 2023[135]. - The effective tax rate for the three months ended September 30, 2024, was 228.7%, significantly higher than 4.1% in 2023, primarily due to operating losses outside the U.S.[148][150]. - The company reported a Non-GAAP effective income tax rate of 15.5% for the nine months ended September 30, 2024, compared to 11.0% for the same period in 2023[189]. Foreign Operations and Currency Risk - Approximately 12% of total revenue for the nine months ended September 30, 2024, was generated outside North America, compared to 15% in the same period of 2023[207]. - A hypothetical 10% adverse change in foreign currency exchange rates would have negatively impacted the net loss for the nine months ended September 30, 2024, by approximately $2.3 million[207]. - The company does not currently engage in any hedging activity to reduce potential exposure to currency fluctuations, although it may consider this in the future[207]. 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[213]. - The lawsuits include claims from jurisdictions such as San Francisco, Cook and Kane Counties in Illinois, and the State of New York[214]. - The company intends to vigorously defend against the lawsuits and believes it has meritorious defenses[215]. - Future litigation may be necessary to defend proprietary rights or recover amounts owed, which could adversely impact the company[216]. Stock-Based Compensation - Stock-based compensation increased to $11,449 thousand in Q3 2024 from $6,942 thousand in Q3 2023, a 65% rise[187]. - The company reported stock-based compensation of $11,449,000 for the three months ended September 30, 2024, compared to $6,942,000 in the same period last year, marking a 65% increase[193]. Internal Controls and Accounting Policies - There were no material changes to critical accounting policies compared to the previous annual report filed on February 28, 2024[198]. - There were no changes in internal control over financial reporting that materially affected the company during the quarter ended September 30, 2024[210].