Bandwidth Announces Second Quarter 2019 Financial Results
July 31, 2019
"Our relentless focus on customer success along with our investments in our platform and people continue to drive our growth. The business performed well in the second quarter, as we saw further growth with both new and existing customers," stated
Second Quarter 2019 Financial Highlights
- Revenue: Total revenue for the second quarter of 2019 was
$56.8 million , up 18% compared to$48.3 million in the second quarter of 2018. Within total revenue, CPaaS revenue was$48.0 million , up 20% compared to$39.8 million for the second quarter of 2018. Other revenue contributed the remaining$8.8 million for the second quarter of 2019. Other revenue was$8.5 million in the same period last year. - Gross Profit: Gross profit for the second quarter of 2019 was
$26.7 million , compared to$21.7 million for the second quarter of 2018. Gross margin for the second quarter of 2019 was 47%, compared to 45% for the second quarter of 2018. Non-GAAP gross profit for the second quarter of 2019 was$28.2 million , compared to$22.8 million for the second quarter of 2018. Non-GAAP gross margin was 50% for the second quarter of 2019, compared to 47% for the second quarter of 2018. - Net Income: Net income for the second quarter of 2019 was
$3.5 million , or$0.14 per share, based on 24.4 million weighted average diluted shares outstanding. During the second quarter of 2018, net income was$10.5 million , or$0.50 per share, based on 20.9 million weighted average diluted shares outstanding for the second quarter of 2018. - Non-GAAP Net Income (Loss): Non-GAAP net loss for the second quarter of 2019 was
$(0.9) million , or$(0.04) per share, based on 23.1 million weighted average shares outstanding. This compares to a Non-GAAP net income of$4.1 million , or$0.20 per share, based on 20.9 million weighted average diluted shares outstanding for the second quarter of 2018. - Adjusted EBITDA: Adjusted EBITDA was
$0.02 million for the second quarter of 2019, compared to$3.2 million for the second quarter of 2018.
Additional information regarding the non-GAAP financial measures discussed in this release, including an explanation of these measures and how each is calculated, is included below under the heading "Non-GAAP Financial Measures." A reconciliation of GAAP to non-GAAP financial measures has also been provided in the financial tables included below.
Second Quarter 2019 Key Metrics
- The number of active CPaaS customers was 1,467 as of
June 30, 2019 , an increase of 34% from 1,092 as ofJune 30, 2018 . - The dollar-based net retention rate was 113% during the second quarter of 2019, compared to 119% during the second quarter of 2018.
Additional information regarding our active CPaaS customers and dollar-based net retention rate and how each are calculated are included below.
Financial Outlook
As of July 31, 2019, Bandwidth is providing guidance for its third quarter and full year 2019 as follows:
- Third Quarter 2019 Guidance: CPaaS revenue is expected to be in the range of
$50.4 million to $50.9 million . Total revenue is expected to be in the range of$58.4 million to $58.9 million . Non-GAAP loss per share is expected to be in the range of($0.14) to ($0.16) per share, using 23.4 million weighted average shares outstanding. - Full Year 2019 Guidance: CPaaS revenue is expected to be in the range of
$201.8 million to $202.8 million . Total revenue is expected to be in the range of$234.8 million to $235.8 million . Non-GAAP loss per share is expected to be in the range of approximately of($0.43) to ($0.48) per share, using 22.6 million weighted average shares outstanding.
Bandwidth has not reconciled its third quarter and full-year guidance related to non-GAAP net loss to GAAP net loss and non-GAAP loss per share to GAAP loss, because stock-based compensation cannot be reasonably calculated or predicted at this time. Accordingly, a reconciliation is not available without unreasonable effort.
Quarterly Conference Call
Bandwidth will host a conference call today at
About
Bandwidth (NASDAQ: BAND) is a software company focused on communications for the enterprise. Companies like
Forward-Looking Statements
This press release includes forward-looking statements. All statements contained in this press release other than statements of historical facts, including, without limitation, statements regarding our future financial and business performance for the third quarter 2019 and full-year 2019, attractiveness of our product offerings and platform and the value proposition of our products, are forward-looking statements. The words "anticipate," "believe," "continue," "estimate," "expect," "intend," "guide," "may," "will" and similar expressions and their negatives are intended to identify forward-looking statements. We have based these forward-looking statements largely on our current expectations and projections about future events and financial trends that we believe may affect our financial condition, results of operations, business strategy, short-term and long-term business operations and objectives and financial needs. These forward-looking statements are subject to a number of risks and uncertainties, including, without limitation, risks related to our rapid growth and ability to sustain our revenue growth rate, competition in the markets in which we operate, market growth, our ability to innovate and manage our growth, our ability to expand effectively into new markets, our ability to operate in compliance with applicable laws as well as other risks and uncertainties set forth in the "Risk Factors" section of our Form 10-K for the year ended
Non-GAAP Financial Measures
To supplement our consolidated financial statements, which are prepared and presented in accordance with Generally Accepted Accounting Principles in
The presentation of Non-GAAP financial information and other business metrics is not meant to be considered in isolation or as a substitute for the directly comparable financial measures prepared in accordance with GAAP. While our Non-GAAP financial measures and other business metrics are an important tool for financial and operational decision-making and for evaluating our own operating results over different periods of time, we urge investors to review the reconciliation of these financial measures to the comparable GAAP financial measures included above, and not to rely on any single financial measure to evaluate our business.
We define Non-GAAP gross profit as gross profit after adding back depreciation and amortization and stock-based compensation. We add back depreciation and amortization and stock-based compensation because they are non-cash items. We eliminate the impact of these non-cash items, because we do not consider them indicative of our core operating performance. Their exclusion facilitates comparisons of our operating performance on a period-to-period basis. Therefore, we believe that showing gross margin, as adjusted to remove the impact of these non-cash expenses, such as depreciation, amortization and stock-based compensation, is helpful to investors in assessing our gross profit and gross margin performance in a way that is similar to how management assesses our performance. We calculate Non-GAAP gross margin by dividing adjusted gross profit by revenue, expressed as a percentage of revenue.
We define Non-GAAP net income (loss) as net income (loss) adjusted for certain items affecting period to period comparability. Non-GAAP net income (loss) excludes stock-based compensation, amortization of acquired intangible assets related to the Dash acquisition, impairment charges of intangibles assets, loss (gain) on disposal of property and equipment, estimated tax impact of above adjustments, income tax benefit resulting from excess tax benefits associated with the exercise of stock options and vested restricted stock, and benefit resulting from the release of the valuation allowance on our deferred tax assets ("DTA").
We define adjusted EBITDA as net income adjusted to reflect the addition or elimination of certain statement of operations items including, but not limited to: income tax expense (benefit), interest income, net, depreciation and amortization expense, stock-based compensation expense, impairment of intangible assets, and loss (gain) from disposal of property and equipment. We have presented Adjusted EBITDA because it is a key measure used by our management and board of directors to understand and evaluate our core operating performance, generate future operating plans, and make strategic decisions regarding the allocation of capital. In particular, we believe that the exclusion of certain items in calculating Adjusted EBITDA can produce a useful measure for period-to-period comparisons of our business.
We define free cash flow as net cash provided by or used in operating activities less net cash used in investments of property, plant and equipment activities and capitalized development costs for software for internal use. We believe free cash flow is a useful indicator of liquidity and provides information to management and investors about the amount of cash generated from our core operations that can be used for investing in our business. Free cash flow has certain limitations in that it does not represent the total increase or decrease in the cash balance for the period, it does not take into consideration investment in long-term securities, nor does it represent the residual cash flows available for discretionary expenditures. Therefore, it is important to evaluate free cash flow along with our consolidated statements of cash flows.
We believe that these Non-GAAP financial measures provide useful information about our operating results, enhance the overall understanding of past financial performance and future prospects and allow for greater transparency with respect to metrics used by our management in its financial and operational decision-making.
While a reconciliation of Non-GAAP guidance measures to corresponding GAAP measures is not available on a forward-looking basis as a result of the uncertainty regarding, and the potential variability of, many of these costs and expenses that we may incur in the future, we have provided a reconciliation of Non-GAAP financial measures and other business metrics to the nearest comparable GAAP measures in the accompanying financial statement tables included in this press release.
We define an active CPaaS customer account at the end of any period as an individual account, as identified by a unique account identifier, for which we have recognized at least
Our dollar-based net retention rate compares the CPaaS revenue from customers in a quarter to the same quarter in the prior year. To calculate the dollar-based net retention rate, we first identify the cohort of customers that generate CPaaS revenue and that were customers in the same quarter of the prior year. The dollar-based net retention rate is obtained by dividing the CPaaS revenue generated from that cohort in a quarter, by the CPaaS revenue generated from that same cohort in the corresponding quarter in the prior year. When we calculate dollar-based net retention rate for periods longer than one quarter, we use the average of the quarterly dollar-based net retention rates for the quarters in such period.
Bandwidth Inc. |
|||||||||||
Condensed Consolidated Statements of Operations |
|||||||||||
(In thousands, except share and per share amounts) |
|||||||||||
(Unaudited) |
|||||||||||
Three months ended June 30, |
Six months ended June 30, |
||||||||||
2018 |
2019 |
2018 |
2019 |
||||||||
Revenue |
$ |
48,304 |
$ |
56,779 |
$ |
101,316 |
$ |
110,100 |
|||
Cost of revenue |
26,566 |
30,110 |
51,930 |
58,876 |
|||||||
Gross profit |
21,738 |
26,669 |
49,386 |
51,224 |
|||||||
Operating expenses: |
|||||||||||
Research and development |
4,435 |
7,656 |
8,216 |
15,373 |
|||||||
Sales and marketing |
4,654 |
8,514 |
9,176 |
16,863 |
|||||||
General and administrative |
11,490 |
14,282 |
22,059 |
28,615 |
|||||||
Total operating expenses |
20,579 |
30,452 |
39,451 |
60,851 |
|||||||
Operating income (loss) |
1,159 |
(3,783) |
9,935 |
(9,627) |
|||||||
Other income, net |
90 |
729 |
139 |
930 |
|||||||
Income (loss) before taxes |
1,249 |
(3,054) |
10,074 |
(8,697) |
|||||||
Income tax benefit |
9,263 |
6,526 |
6,629 |
14,161 |
|||||||
Net income |
$ |
10,512 |
$ |
3,472 |
$ |
16,703 |
$ |
5,464 |
|||
Earnings per share: |
|||||||||||
Net income per share: |
|||||||||||
Basic |
$ |
0.58 |
$ |
0.15 |
$ |
0.93 |
$ |
0.25 |
|||
Diluted |
$ |
0.50 |
$ |
0.14 |
$ |
0.80 |
$ |
0.23 |
|||
Weighted average number of common shares outstanding: |
|||||||||||
Basic |
18,154,964 |
23,102,553 |
17,908,159 |
21,807,523 |
|||||||
Diluted |
20,893,653 |
24,447,417 |
20,866,777 |
23,262,496 |
The Company recognized total stock-based compensation expense as follows:
Three months ended June 30, |
Six months ended June 30, |
||||||||||
2018 |
2019 |
2018 |
2019 |
||||||||
Cost of revenue |
$ |
32 |
$ |
50 |
$ |
49 |
$ |
106 |
|||
Research and development |
129 |
358 |
203 |
730 |
|||||||
Sales and marketing |
140 |
292 |
218 |
612 |
|||||||
General and administrative |
461 |
930 |
785 |
1,858 |
|||||||
Total |
$ |
762 |
$ |
1,630 |
$ |
1,255 |
$ |
3,306 |
Bandwidth Inc. |
|||||
Condensed Consolidated Balance Sheets |
|||||
(In thousands) |
|||||
(Unaudited) |
|||||
December 31, |
June 30, |
||||
2018 |
2019 |
||||
Assets |
|||||
Current assets: |
|||||
Cash and cash equivalents |
$ |
41,261 |
$ |
140,091 |
|
Marketable securities |
17,400 |
55,839 |
|||
Accounts receivable, net of allowance for doubtful accounts |
24,009 |
26,695 |
|||
Prepaid expenses and other current assets |
6,114 |
8,541 |
|||
Deferred costs |
2,630 |
2,053 |
|||
Total current assets |
91,414 |
233,219 |
|||
Property and equipment, net |
25,136 |
31,799 |
|||
Intangible assets, net |
7,089 |
6,829 |
|||
Deferred costs, non-current |
1,828 |
1,038 |
|||
Other long-term assets |
727 |
2,128 |
|||
Goodwill |
6,867 |
6,867 |
|||
Deferred tax asset |
17,359 |
31,615 |
|||
Total assets |
$ |
150,420 |
$ |
313,495 |
|
Liabilities and stockholders' equity |
|||||
Current liabilities: |
|||||
Accounts payable |
$ |
3,418 |
$ |
3,089 |
|
Accrued expenses and other current liabilities |
21,393 |
24,120 |
|||
Current portion of deferred revenue |
5,324 |
4,887 |
|||
Advanced billings |
2,588 |
2,676 |
|||
Total current liabilities |
32,723 |
34,772 |
|||
Deferred rent, net of current portion |
2,503 |
3,698 |
|||
Deferred revenue, net of current portion |
6,424 |
5,900 |
|||
Total liabilities |
41,650 |
44,370 |
|||
Stockholders' equity: |
|||||
Class A and Class B common stock |
19 |
23 |
|||
Additional paid-in capital |
116,600 |
271,628 |
|||
Accumulated deficit |
(7,848) |
(2,558) |
|||
Accumulated other comprehensive (loss) income |
(1) |
32 |
|||
Total stockholders' equity |
108,770 |
269,125 |
|||
Total liabilities and stockholders' equity |
$ |
150,420 |
$ |
313,495 |
Bandwidth Inc. |
|||||
Condensed Consolidated Statements of Cash Flows |
|||||
(In thousands) |
|||||
(Unaudited) |
|||||
Six months ended June 30, |
|||||
2018 |
2019 |
||||
Operating activities |
|||||
Net income |
$ |
16,703 |
$ |
5,464 |
|
Adjustments to reconcile net income to net cash provided by (used in) operating activities: |
|||||
Depreciation and amortization |
2,683 |
4,321 |
|||
Accretion of bond discount |
(26) |
(478) |
|||
Amortization of debt issuance costs |
32 |
139 |
|||
Stock-based compensation |
1,255 |
3,306 |
|||
Deferred taxes |
(6,677) |
(14,263) |
|||
Loss on disposal of property and equipment |
10 |
351 |
|||
Changes in operating assets and liabilities: |
|||||
Accounts receivable |
(1,776) |
(2,683) |
|||
Prepaid expenses and other assets |
(620) |
(3,586) |
|||
Deferred costs |
225 |
1,290 |
|||
Accounts payable |
(2,375) |
(95) |
|||
Accrued expenses and other liabilities |
2,517 |
1,584 |
|||
Deferred revenue and advanced billings |
4,141 |
(1,047) |
|||
Deferred rent |
1,025 |
285 |
|||
Net cash provided by (used in) operating activities |
17,117 |
(5,412) |
|||
Investing activities |
|||||
Purchase of property and equipment |
(3,113) |
(7,844) |
|||
Capitalized software development costs |
(1,547) |
(1,675) |
|||
Proceeds from sale of property and equipment |
3 |
— |
|||
Purchase of marketable securities |
(13,995) |
(55,933) |
|||
Maturities of marketable securities |
3,000 |
18,000 |
|||
Net cash used in investing activities |
(15,652) |
(47,452) |
|||
Financing activities |
|||||
Proceeds from the follow-on public offering, net of underwriting discounts |
— |
147,391 |
|||
Payment of costs related to the follow-on public offering |
— |
(755) |
|||
Payment of costs related to the initial public offering |
(285) |
— |
|||
Payments on capital leases |
(50) |
— |
|||
Payment of debt issuance costs |
— |
(125) |
|||
Proceeds from exercises of stock options |
6,967 |
6,381 |
|||
Proceeds from exercises of warrants |
37 |
— |
|||
Equity awards withheld and paid for tax liabilities |
— |
(945) |
|||
Net cash provided by financing activities |
6,669 |
151,947 |
|||
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
— |
(1) |
|||
Net increase in cash, cash equivalents, and restricted cash |
8,134 |
99,082 |
|||
Cash, cash equivalents, and restricted cash, beginning of period |
37,870 |
41,501 |
|||
Cash, cash equivalents, and restricted cash, end of period |
$ |
46,004 |
$ |
140,583 |
|
Bandwidth Inc. |
|||||||||||||||
Reconciliation of Non-GAAP Financial Measures |
|||||||||||||||
(In thousands, except share and per share amounts) |
|||||||||||||||
(Unaudited) |
|||||||||||||||
Non-GAAP Gross Profit and Non-GAAP Gross Margin |
|||||||||||||||
Consolidated |
|||||||||||||||
Three months ended June 30, |
Six months ended June 30, |
||||||||||||||
2018 |
2019 |
2018 |
2019 |
||||||||||||
Consolidated Gross Profit |
$ |
21,738 |
$ |
26,669 |
$ |
49,386 |
$ |
51,224 |
|||||||
Depreciation |
1,015 |
1,530 |
2,078 |
2,823 |
|||||||||||
Stock-based compensation |
32 |
50 |
49 |
106 |
|||||||||||
Non-GAAP Gross Profit |
$ |
22,785 |
$ |
28,249 |
$ |
51,513 |
$ |
54,153 |
|||||||
Non-GAAP Gross Margin % |
47 % |
50 % |
51 % |
49 % |
|||||||||||
By Segment |
|||||||||||||||
CPaaS |
|||||||||||||||
Three months ended June 30, |
Six months ended June 30, |
||||||||||||||
2018 |
2019 |
2018 |
2019 |
||||||||||||
CPaaS Gross Profit |
$ |
16,696 |
$ |
21,516 |
$ |
33,688 |
$ |
41,229 |
|||||||
Depreciation |
1,015 |
1,530 |
2,078 |
2,823 |
|||||||||||
Stock-based compensation |
32 |
50 |
49 |
106 |
|||||||||||
Non-GAAP Gross Profit |
$ |
17,743 |
$ |
23,096 |
$ |
35,815 |
$ |
44,158 |
|||||||
Non-GAAP CPaaS Gross Margin % |
45 % |
48 % |
45 % |
47 % |
|||||||||||
Other |
|||||||||||
There are no non-GAAP adjustments to gross profit for the Other segment. |
|||||||||||
Adjusted EBITDA |
|||||||||||
Three months ended June 30, |
Six months ended June 30, |
||||||||||
2018 |
2019 |
2018 |
2019 |
||||||||
Net income |
$ |
10,512 |
$ |
3,472 |
$ |
16,703 |
$ |
5,464 |
|||
Income tax benefit (1) |
(9,263) |
(6,526) |
(6,629) |
(14,161) |
|||||||
Interest income, net |
(90) |
(719) |
(139) |
(920) |
|||||||
Depreciation |
1,166 |
1,982 |
2,388 |
4,061 |
|||||||
Amortization |
130 |
130 |
295 |
260 |
|||||||
Stock-based compensation |
762 |
1,630 |
1,255 |
3,306 |
|||||||
Loss on disposal of property and equipment |
1 |
55 |
10 |
351 |
|||||||
Adjusted EBITDA |
$ |
3,218 |
$ |
24 |
$ |
13,883 |
$ |
(1,639) |
|||
(1) Includes excess tax benefits associated with the exercise of stock options and vesting of restricted stock units of $7,052 in the three and six months ended June 30, 2018, and $5,717 and $11,739 in the three and six months ended June 30, 2019, respectively. |
Non-GAAP Net Income (Loss) |
|||||||||||
Three months ended June 30, |
Six months ended June 30, |
||||||||||
2018 |
2019 |
2018 |
2019 |
||||||||
Net income |
$ |
10,512 |
$ |
3,472 |
$ |
16,703 |
$ |
5,464 |
|||
Stock-based compensation |
762 |
1,630 |
1,255 |
3,306 |
|||||||
Amortization related to acquisitions |
130 |
130 |
260 |
260 |
|||||||
Loss on disposal of property and equipment |
1 |
55 |
10 |
351 |
|||||||
Estimated tax effects of adjustments |
(229) |
(465) |
(391) |
(1,004) |
|||||||
Income tax benefit of option exercises |
(7,052) |
(5,544) |
(7,052) |
(10,806) |
|||||||
Income tax benefit of vesting restricted stocks units |
— |
(173) |
— |
(933) |
|||||||
Non-GAAP net income (loss) |
$ |
4,124 |
$ |
(895) |
$ |
10,785 |
$ |
(3,362) |
|||
Non-GAAP net income (loss) per Non-GAAP share |
|||||||||||
Basic |
$ |
0.23 |
$ |
(0.04) |
$ |
0.60 |
$ |
(0.15) |
|||
Diluted |
$ |
0.20 |
$ |
(0.04) |
$ |
0.52 |
$ |
(0.15) |
|||
Non-GAAP weighted average number of shares |
|||||||||||
Non-GAAP basic shares |
18,154,964 |
23,102,553 |
17,908,159 |
21,807,523 |
|||||||
Non-GAAP diluted shares |
20,893,653 |
23,102,553 |
20,866,777 |
21,807,523 |
Free Cash Flow |
|||||||||||
Three months ended June 30, |
Six months ended June 30, |
||||||||||
2018 |
2019 |
2018 |
2019 |
||||||||
Net cash provided by (used in) operating activities |
$ |
5,874 |
$ |
2,420 |
$ |
17,117 |
$ |
(5,412) |
|||
Net cash used in investing in capital assets (1) |
(3,258) |
(6,482) |
(4,660) |
(9,519) |
|||||||
Free cash flow |
$ |
2,616 |
$ |
(4,062) |
$ |
12,457 |
$ |
(14,931) |
|||
(1) Represents the acquisition cost of property, equipment and capitalized development costs for software for internal use. |
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SOURCE
Investor Contact: Marc P. Griffin, ICR, Inc., for Bandwidth, 919-283-5993, ir@bandwidth.com