Bandwidth Announces Third Quarter 2023 Financial Results
November 02, 2023
Revenue and profitability exceeded guidance
On track to achieve 30% annual growth in profitability
Achieved record Free Cash Flow
"We are pleased to announce that we have exceeded both our revenue and profitability guidance for the third quarter and made strong progress towards our goal of growing profitability by 30% for the full year. We look forward to finishing 2023 with strong momentum," said
Third Quarter 2023 Financial Highlights
The following table summarizes the consolidated financial highlights for the three months ended
Three months ended |
|||
2023 |
2022 |
||
Revenue |
$ 152 |
$ 148 |
|
Gross Margin |
39 % |
43 % |
|
Non-GAAP Gross Margin (1) |
55 % |
57 % |
|
Adjusted EBITDA(1) |
$ 14 |
$ 13 |
|
Free Cash Flow (1) |
$ 18 |
$ 13 |
(1) 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.
|
"Accelerating profitable growth is a core principle for Bandwidth and our results this quarter reflect that as we benefited from our growing market position in commercial messaging and strong operating discipline," said Daryl Raiford, Bandwidth's Chief Financial Officer. "We believe that our third quarter financial results, along with momentum from commercial messaging and enterprise customers, position us for a solid fourth quarter and full year of profitable growth against a macro backdrop that remains constrained."
Third Quarter Customer and Operational Highlights
- A European-based cloud contact center provider chose Bandwidth as their primary provider across several regions for call quality and reliability, award-winning support, and the ease of use of the API-driven portal.
- A leader in customer engagement in the automotive industry selected Bandwidth to help them meet the demand of their rapidly growing conversational marketing messaging needs. Bandwidth's enterprise-grade support experience and scalability are key to the customer speeding up their time to market.
- A Global 2000 manufacturing conglomerate chose Bandwidth to enable their migration to the cloud, starting with their internal communications and dynamic 911. Bandwidth's expertise and ability to support physical infrastructure throughout the transition is key to the customer.
- Launched AIBridge with partners
Google and Cognigy. AIBridge, the newest pre-built integration with Maestro, enables enterprises to resolve customer issues faster by first routing incoming contact center calls to an AI-driven virtual agent, freeing up live agents' time to resolve more complex issues.
Financial Outlook
Bandwidth's outlook is based on current indications for its business, which are subject to change. Bandwidth is providing guidance for its fourth quarter and full year 2023 as follows:
Q4 2023 Guidance |
Full Year 2023 Guidance |
||
Revenue (millions) |
|
|
|
Adjusted EBITDA (millions) |
|
|
Bandwidth has not reconciled its fourth quarter and full year 2023 guidance related to Adjusted EBITDA to GAAP net income or loss, because stock-based compensation cannot be reasonably calculated or predicted at this time. Accordingly, a reconciliation is not available without unreasonable effort.
Upcoming Investor Conference Schedule
Northland Capital Markets Communications SaaS Conference virtual fireside chat onNovember 30, 2023 at10:00AM Eastern Time .Barclays Global Technology Conference inSan Francisco, CA hosting meetings onDecember 7, 2023 .
Conference Call
Bandwidth will host a conference call to discuss financial results for the third quarter ended
Conference Call Details
Domestic dial-in:
844-481-2707
International dial-in:
412-317-0663
Replay information
An audio replay of this conference call will be available through
About
Bandwidth (NASDAQ: BAND) is a global cloud communications software company that helps enterprises deliver exceptional experiences through voice calling, text messaging and emergency services. Our solutions and our Communications Cloud, covering 65+ countries and over 90 percent of global GDP, are trusted by all the leaders in unified communications and cloud contact centers–including
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, future financial and business performance for the quarter and year ending
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 below, 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, amortization of acquired intangible assets related to acquisitions and stock-based compensation. We add back depreciation, amortization of acquired intangible assets related to acquisitions 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, 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 Non-GAAP gross profit by revenue less pass-through messaging surcharges, expressed as a percentage of revenue.
We define Non-GAAP net income (loss) as net income or 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 acquisitions, amortization of debt discount and issuance costs for convertible debt, acquisition related expenses, impairment charges of intangibles assets, net cost associated with early lease terminations and leases without economic benefit, (gain) loss on sale of business, net (gain) loss on extinguishment of debt, gain on business interruption insurance recoveries, non-recurring items not indicative of ongoing operations and other, and estimated tax impact of above adjustments, net of valuation allowances.
We define Adjusted EBITDA as net income or losses from continuing operations, adjusted to reflect the addition or elimination of certain statement of operations items including, but not limited to: income tax (benefit) provision, interest (income) expense, net, depreciation and amortization expense, acquisition related expenses, stock-based compensation expense, impairment of intangible assets, (gain) loss on sale of business, net cost associated with early lease terminations and leases without economic benefit, net (gain) loss on extinguishment of debt, gain on business interruption insurance recoveries, and non-recurring items not indicative of ongoing operations and other. 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 and trends, 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 the acquisition of property, plant and equipment 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.
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.
|
|||||||
Three months ended |
Nine months ended |
||||||
2023 |
2022 |
2023 |
2022 |
||||
Revenue |
$ 152,013 |
$ 148,325 |
$ 435,731 |
$ 416,178 |
|||
Cost of revenue |
92,514 |
84,861 |
261,624 |
241,896 |
|||
Gross profit |
59,499 |
63,464 |
174,107 |
174,282 |
|||
Operating expenses |
|||||||
Research and development |
24,792 |
25,044 |
75,305 |
71,735 |
|||
Sales and marketing |
25,011 |
23,184 |
75,794 |
69,663 |
|||
General and administrative |
15,843 |
16,623 |
48,430 |
50,191 |
|||
Total operating expenses |
65,646 |
64,851 |
199,529 |
191,589 |
|||
Operating loss |
(6,147) |
(1,387) |
(25,422) |
(17,307) |
|||
Other income (expense), net |
|||||||
Net gain on extinguishment of debt |
— |
— |
12,767 |
— |
|||
Gain on business interruption insurance recoveries |
— |
— |
4,000 |
— |
|||
Other income (expense), net |
798 |
(338) |
52 |
2,282 |
|||
Total other income (expense), net |
798 |
(338) |
16,819 |
2,282 |
|||
Loss before income taxes |
(5,349) |
(1,725) |
(8,603) |
(15,025) |
|||
Income tax benefit |
219 |
923 |
3,194 |
1,161 |
|||
Net loss |
$ (5,130) |
$ (802) |
$ (5,409) |
$ (13,864) |
|||
Net loss per share, basic and diluted |
$ (0.20) |
$ (0.03) |
$ (0.21) |
$ (0.55) |
|||
Weighted average number of common shares outstanding, basic and diluted |
25,613,441 |
25,304,057 |
25,539,642 |
25,268,216 |
|||
The Company recognized total stock-based compensation expense as follows: |
|||||||
Three months ended |
Nine months ended |
||||||
2023 |
2022 |
2023 |
2022 |
||||
Cost of revenue |
$ 182 |
$ 93 |
$ 578 |
$ 283 |
|||
Research and development |
2,822 |
1,767 |
9,278 |
5,298 |
|||
Sales and marketing |
1,160 |
593 |
3,825 |
2,219 |
|||
General and administrative |
2,778 |
2,439 |
8,644 |
7,259 |
|||
Total |
$ 6,942 |
$ 4,892 |
$ 22,325 |
$ 15,059 |
|
|||
As of |
As of |
||
2023 |
2022 |
||
Assets |
|||
Current assets: |
|||
Cash and cash equivalents |
$ 107,373 |
$ 113,641 |
|
Marketable securities |
31,745 |
71,231 |
|
Accounts receivable, net of allowance for doubtful accounts |
75,046 |
74,465 |
|
Deferred costs |
4,185 |
3,566 |
|
Prepaid expenses and other current assets |
16,037 |
16,705 |
|
Total current assets |
234,386 |
279,608 |
|
Property, plant and equipment, net |
176,780 |
99,753 |
|
Operating right-of-use asset, net |
161,106 |
9,993 |
|
Intangible assets, net |
164,688 |
177,370 |
|
Deferred costs, non-current |
4,715 |
4,938 |
|
Other long-term assets |
6,404 |
31,251 |
|
|
322,003 |
326,405 |
|
Total assets |
$ 1,070,082 |
$ 929,318 |
|
Liabilities and stockholders' equity |
|||
Current liabilities: |
|||
Accounts payable |
$ 31,211 |
$ 26,750 |
|
Accrued expenses and other current liabilities |
60,452 |
62,577 |
|
Current portion of deferred revenue |
7,869 |
7,181 |
|
Advanced billings |
4,305 |
10,049 |
|
Operating lease liability, current |
4,766 |
7,450 |
|
Total current liabilities |
108,603 |
114,007 |
|
Other liabilities |
620 |
11,176 |
|
Operating lease liability, net of current portion |
222,714 |
4,640 |
|
Deferred revenue, net of current portion |
8,098 |
8,306 |
|
Deferred tax liability |
32,018 |
38,466 |
|
Convertible senior notes |
418,042 |
480,546 |
|
Total liabilities |
790,095 |
657,141 |
|
Stockholders' equity: |
|||
Class A and Class B common stock |
26 |
25 |
|
Additional paid-in capital |
383,013 |
364,913 |
|
Accumulated deficit |
(53,956) |
(48,547) |
|
Accumulated other comprehensive loss |
(49,096) |
(44,214) |
|
Total stockholders' equity |
279,987 |
272,177 |
|
Total liabilities and stockholders' equity |
$ 1,070,082 |
$ 929,318 |
|
|||
Nine months ended |
|||
2023 |
2022 |
||
Cash flows from operating activities |
|||
Net loss |
$ (5,409) |
$ (13,864) |
|
Adjustments to reconcile net loss to net cash provided by operating activities |
|||
Depreciation and amortization |
29,687 |
26,866 |
|
Non-cash reduction to the right-of-use asset |
5,227 |
5,308 |
|
Amortization of debt discount and issuance costs |
1,995 |
2,343 |
|
Stock-based compensation |
22,325 |
15,059 |
|
Deferred taxes and other |
(5,902) |
(5,496) |
|
Net gain on extinguishment of debt |
(12,767) |
— |
|
Changes in operating assets and liabilities: |
|||
Accounts receivable, net of allowances |
(654) |
(18,311) |
|
Prepaid expenses and other assets |
2,102 |
(13,389) |
|
Accounts payable |
4,164 |
14,305 |
|
Accrued expenses and other liabilities |
(13,031) |
17,142 |
|
Operating right-of-use liability |
(8,004) |
(5,623) |
|
Net cash provided by operating activities |
19,733 |
24,340 |
|
Cash flows from investing activities |
|||
Purchase of property, plant and equipment |
(5,287) |
(18,669) |
|
Deposits for construction in progress |
— |
(14,545) |
|
Capitalized software development costs |
(8,384) |
(2,121) |
|
Purchase of marketable securities |
(60,625) |
(178,153) |
|
Proceeds from sales and maturities of marketable securities |
100,109 |
33,102 |
|
Proceeds from sale of business |
1,070 |
— |
|
Net cash provided by (used in) investing activities |
26,883 |
(180,386) |
|
Cash flows from financing activities |
|||
Payments on finance leases |
(124) |
(162) |
|
Net cash paid for debt extinguishment |
(51,259) |
— |
|
Payment of debt issuance costs |
(696) |
(553) |
|
Proceeds from exercises of stock options |
413 |
162 |
|
Value of equity awards withheld for tax liabilities |
(1,056) |
(2,047) |
|
Net cash used in financing activities |
(52,722) |
(2,600) |
|
Effect of exchange rate changes on cash, cash equivalents and restricted cash |
(887) |
(6,341) |
|
Net decrease in cash, cash equivalents, and restricted cash |
(6,993) |
(164,987) |
|
Cash, cash equivalents, and restricted cash, beginning of period |
114,622 |
332,289 |
|
Cash, cash equivalents, and restricted cash, end of period |
$ 107,629 |
$ 167,302 |
|
|||||||
Non-GAAP Gross Profit and Non-GAAP Gross Margin |
|||||||
Three months ended |
Nine months ended |
||||||
2023 |
2022 |
2023 |
2022 |
||||
Gross Profit |
$ 59,499 |
$ 63,464 |
$ 174,107 |
$ 174,282 |
|||
Gross Profit Margin % |
39 % |
43 % |
40 % |
42 % |
|||
Depreciation |
4,056 |
3,403 |
11,790 |
10,141 |
|||
Amortization of acquired intangible assets |
1,959 |
1,831 |
5,863 |
5,797 |
|||
Stock-based compensation |
182 |
93 |
578 |
283 |
|||
Non-GAAP Gross Profit |
$ 65,696 |
$ 68,791 |
$ 192,338 |
$ 190,503 |
|||
Non-GAAP Gross Margin % (1) |
55 % |
57 % |
54 % |
54 % |
________________________
(1) Calculated by dividing Non-GAAP gross profit by revenue less pass-through messaging surcharges of |
|
|||||||
Non-GAAP Net Income |
|||||||
Three months ended |
Nine months ended |
||||||
2023 |
2022 |
2023 |
2022 |
||||
Net loss |
$ (5,130) |
$ (802) |
$ (5,409) |
$ (13,864) |
|||
Stock-based compensation |
6,942 |
4,892 |
22,325 |
15,059 |
|||
Amortization of acquired intangibles |
4,348 |
4,118 |
12,960 |
13,018 |
|||
Amortization of debt discount and issuance costs for convertible debt |
484 |
763 |
1,520 |
2,284 |
|||
Gain on sale of business |
— |
— |
— |
(3,777) |
|||
Net cost associated with early lease terminations and leases without economic benefit |
1,175 |
— |
1,175 |
— |
|||
Net gain on extinguishment of debt |
— |
— |
(12,767) |
— |
|||
Gain on business interruption insurance recoveries |
— |
— |
(4,000) |
— |
|||
Non-recurring items not indicative of ongoing operations and other (1) |
54 |
101 |
793 |
290 |
|||
Estimated tax effects of adjustments (2) |
(1,526) |
(1,074) |
(4,661) |
(3,360) |
|||
Non-GAAP net income |
$ 6,347 |
$ 7,998 |
$ 11,936 |
$ 9,650 |
|||
Interest expense on Convertible Notes (3) |
317 |
563 |
971 |
1,688 |
|||
Numerator used to compute Non-GAAP diluted net income per share |
$ 6,664 |
$ 8,561 |
$ 12,907 |
$ 11,338 |
|||
Net loss per share, basic and diluted |
$ (0.20) |
$ (0.03) |
$ (0.21) |
$ (0.55) |
|||
Non-GAAP net income per Non-GAAP share |
|||||||
Basic |
$ 0.25 |
$ 0.32 |
$ 0.47 |
$ 0.38 |
|||
Diluted |
$ 0.23 |
$ 0.27 |
$ 0.44 |
$ 0.36 |
|||
Weighted average number of shares outstanding |
|||||||
Basic and diluted shares |
25,613,441 |
25,304,057 |
25,539,642 |
25,268,216 |
|||
Non-GAAP basic shares |
25,613,441 |
25,304,057 |
25,539,642 |
25,268,216 |
|||
Convertible debt conversion |
3,317,023 |
5,788,805 |
3,484,424 |
5,788,805 |
|||
Stock options issued and outstanding |
20,360 |
64,905 |
47,345 |
107,215 |
|||
Non-GAAP diluted shares |
28,950,824 |
31,157,767 |
29,071,411 |
31,164,236 |
________________________
(1) Non-recurring items not indicative of ongoing operations and other include (i) |
(2) The estimated tax-effect of adjustments is determined by recalculating the tax provision on a Non-GAAP basis. The Non-GAAP effective income tax rate was 11.0% and 18.6% for the nine months ended |
(3) Upon the adoption of ASU 2020-06 on |
|
|||||||
Adjusted EBITDA |
|||||||
Three months ended |
Nine months ended |
||||||
2023 |
2022 |
2023 |
2022 |
||||
Net loss |
$ (5,130) |
$ (802) |
$ (5,409) |
$ (13,864) |
|||
Income tax benefit |
(219) |
(923) |
(3,194) |
(1,161) |
|||
Interest (income) expense, net |
(59) |
737 |
1,177 |
2,861 |
|||
Depreciation |
6,647 |
4,661 |
16,727 |
13,848 |
|||
Amortization |
4,348 |
4,118 |
12,960 |
13,018 |
|||
Stock-based compensation |
6,942 |
4,892 |
22,325 |
15,059 |
|||
Gain on sale of business |
— |
— |
— |
(3,777) |
|||
Net cost associated with early lease terminations and leases without economic benefit |
1,175 |
— |
1,175 |
— |
|||
Net gain on extinguishment of debt |
— |
— |
(12,767) |
— |
|||
Gain on business interruption insurance recoveries |
— |
— |
(4,000) |
— |
|||
Non-recurring items not indicative of ongoing operations and other (1) |
54 |
101 |
391 |
290 |
|||
Adjusted EBITDA |
$ 13,758 |
$ 12,784 |
$ 29,385 |
$ 26,274 |
________________________
(1) Non-recurring items not indicative of ongoing operations and other include |
Free Cash Flow |
|||||||
Three months ended |
Nine months ended |
||||||
2023 |
2022 |
2023 |
2022 |
||||
Net cash provided by operating activities |
$ 23,001 |
$ 24,016 |
$ 19,733 |
$ 24,340 |
|||
Net cash used in investing in capital assets (1) |
(4,811) |
(10,524) |
(13,671) |
(20,790) |
|||
Free cash flow |
$ 18,190 |
$ 13,492 |
$ 6,062 |
$ 3,550 |
________________________
(1) Represents the acquisition cost of property, plant and equipment and capitalized development costs for software for internal use. |
View original content:https://www.prnewswire.com/news-releases/bandwidth-announces-third-quarter-2023-financial-results-301976193.html
SOURCE
Investor Contact, Sarah Walas, Bandwidth, 919-504-6585, ir@bandwidth.com