UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
___________________________________________________
FORM 8-K
___________________________________________________
CURRENT REPORT
Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) February 23, 2022
___________________________________________________
(Exact name of registrant as specified in its charter)
___________________________________________________
(State or other jurisdiction of incorporation) | (Commission File Number) | (IRS Employer Identification No.) | ||||||||||||
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code
Not Applicable
(Former name or former address, if changed since last report)
___________________________________________________
Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:
| Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425) | |||||
| Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12) | |||||
| Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b)) | |||||
| Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c)) | |||||
Securities registered pursuant to Section 12(b) of the Act:
| Title of each class | Trading Symbol(s) | Name of each exchange on which registered | ||||||||||||
Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter).
Emerging growth company ☐
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
☐
Item 2.02 Results of Operations and Financial Condition.
On February 23, 2022, Bandwidth Inc. issued a press release reporting its financial results for the fourth quarter ended December 31, 2021. A copy of the press release is furnished as Exhibit 99.1 to this Current Report on Form 8-K.
The information furnished with this Item 2.02, including Exhibit 99.1, shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to the liabilities of that section, nor shall it be deemed incorporated by reference into any filing under the Securities Act of 1933, as amended, except as expressly set forth by specific reference in such a filing.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits
| Exhibit No. | Description | |||||||
| Bandwidth Inc. press release, dated February 23, 2022 | ||||||||
| 104 | Cover Page Interactive File (the cover page tags are embedded within the Inline XBRL document) | |||||||
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.
| BANDWIDTH INC. | ||||||||
| Date: February 23, 2022 | By: | /s/ Daryl E. Raiford | ||||||
| Name: | Daryl E. Raiford | |||||||
| Title: | Chief Financial Officer | |||||||
Bandwidth Announces Fourth Quarter and Full Year 2021 Financial Results
Full year Total Revenue of $491 million, up 43% year-over-year
Full year CPaaS Revenue of $414 million, up 39% year-over-year
February 23, 2022 Conference Call Conference call to discuss the Company’s financial results for the fourth quarter and full year ended December 31, 2021 on February 23, 2022, via the investor section of its website at https://investors.bandwidth.com where a replay will also be available shortly following the conference call. | Raleigh, NC - Bandwidth Inc. (NASDAQ: BAND), a leading global enterprise cloud communications company, today announced financial results for the fourth quarter and full year ended December 31, 2021. “I am very pleased with our strategic, operational and financial achievements in 2021. We helped customers unlock the potential of the cloud, deepened existing relationships and rose to the challenge of DDoS, all while delivering strong financial results,” stated David Morken, Chief Executive Officer of Bandwidth. “We have strengthened our ability to provide customers with unparalleled enterprise-grade service across the globe. With the successful completion of our integration efforts and globally aligned operations, we are uniquely positioned to be the global platform of choice for cloud communications transformation.” Fourth Quarter and Full Year 2021 Financial Highlights The following table summarizes the consolidated financial highlights as of December 31, 2021 (in millions, except per share amounts). (1) | ||||||||||||||||||||||||||||
Conference Call Details February 23, 2022 5:00 pm ET Domestic dial-in: (855) 327-6837 International dial-in: (631) 891-4304 Replay information An audio replay of this conference call will be available through March 2, 2022, by dialing (844) 512-2921 or (412) 317-6671 for international callers, and entering passcode 10018013. Investor Contact Sarah Walas Bandwidth 919-504-6585 ir@bandwidth.com | Three months ended December 31, | Year ended December 31, | |||||||||||||||||||||||||||
| 2020 | 2021 | 2020 | 2021 | ||||||||||||||||||||||||||
CPaaS Revenue (2) | $ | 98 | $ | 101 | $ | 298 | $ | 414 | |||||||||||||||||||||
Total Revenue (2) | $ | 113 | $ | 126 | $ | 343 | $ | 491 | |||||||||||||||||||||
| Consolidated Gross Margin | 46 | % | 42 | % | 46 | % | 45 | % | |||||||||||||||||||||
| Non-GAAP Gross Margin | 49 | % | 47 | % | 49 | % | 49 | % | |||||||||||||||||||||
| CPaaS Gross Margin | 47 | % | 48 | % | 46 | % | 47 | % | |||||||||||||||||||||
| Non-GAAP CPaaS Gross Margin | 51 | % | 53 | % | 50 | % | 53 | % | |||||||||||||||||||||
| Net Loss | $ | (20) | $ | (8) | $ | (44) | $ | (27) | |||||||||||||||||||||
| Non-GAAP Net Income | $ | 4 | $ | 2 | $ | 14 | $ | 26 | |||||||||||||||||||||
| Net loss per share, basic and diluted | $ | (0.81) | $ | (0.33) | $ | (1.83) | $ | (1.09) | |||||||||||||||||||||
| Weighted average shares outstanding, basic and diluted | 25 | 25 | 24 | 25 | |||||||||||||||||||||||||
| Non-GAAP net income per Non-GAAP share | $ | 0.13 | $ | 0.09 | $ | 0.55 | $ | 0.97 | |||||||||||||||||||||
| Non-GAAP weighted average shares outstanding, diluted | 27 | 25 | 26 | 26 | |||||||||||||||||||||||||
| Adjusted EBITDA | $ | 8 | $ | 8 | $ | 26 | $ | 50 | |||||||||||||||||||||
(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. (2) For the twelve months following acquisition closing on November 2, 2020, Voxbone contributed CPaaS revenue of $17 million and $81 million in 2020 and 2021, respectively and Other revenue of $1 million and $3 million in 2020 and 2021, respectively. | |||||||||||||||||||||||||||||
1
| Year ended December 31, | ||||||||||||||
| 2020 | 2021 | |||||||||||||
Active CPaaS Customers (1) | 2,848 | 3,228 | ||||||||||||
Dollar-based net retention rate (1) | 131% | 110% | ||||||||||||
Normalized dollar-based net retention rate (2) | 123% | 117% | ||||||||||||
(1) Additional information regarding our active CPaaS customers and dollar-based net retention rate and how each are calculated are included below.
(2) Normalizing for estimated benefit from COVID-related usage revenue of $11 million and $2 million political messaging benefit in 2020 and estimated loss of revenue from previously disclosed DDoS attack of approximately $10 million in 2021.
“I'm proud of our team for delivering another strong performance in the fourth quarter, despite the approximate impact of $10 million from DDoS. We exceeded both top and bottom-line guidance for the quarter and full year along with our original 2021 revenue and non-GAAP EPS guidance,” said Daryl Raiford, Chief Financial Officer of Bandwidth. “While the DDoS event continues to affect some customer demand, our profitable operations support our ability to fully invest in our long-term growth. We continue to feel optimistic about the sizable market opportunity ahead of us.”
Fourth Quarter Customer and Company Highlights
•Bandwidth announced Duet for Genesys, a global BYOC solution to accelerate the enterprise contact center move to the cloud. This is the third Duet partnership after Microsoft and RingCentral, and the first in the contact center space. Duet for Genesys enables enterprise customers to unbundle telephony and enjoy cloud-based flexibility, easier integrations and global scale with market leader Genesys.
•A game-changing CCaaS provider chose to expand with Bandwidth in the U.S. and Canada. Previously, Bandwidth powered their contact center platform with our voice services internationally, primarily in Europe. The customer values the call quality and ability to scale on the Bandwidth platform around the world.
•Bandwidth also expanded wallet share within a global customer bundling UCaaS and CCaaS solutions to create a better customer experience. The expanded relationship includes an immediate 50% increase in international voice services and the opportunity to gain more. In addition to the expanded international business, Bandwidth is their primary provider for local numbers and inbound calling in the U.S. and their exclusive emergency services provider.
•A marketing and advertising software provider chose Bandwidth's programmable messaging APIs to power its software that helps small businesses communicate with their end-consumers in the U.S., Canada and Europe. Bandwidth was chosen for the ability to provide enterprise-grade service and improved message deliverability over their previous CPaaS provider.
Financial Outlook
Bandwidth’s outlook assumes current business conditions, current foreign currency exchange rates including the effect of weakened US dollar rates, divestitures and an estimated impact of $16 million - $24 million in 2022 arising from the previously disclosed 2021 DDoS attacks. Bandwidth is providing guidance for its first quarter and full year 2022 as follows:
| Q1 2022 Guidance | Full Year 2022 Guidance | ||||||||||
Total Revenue (millions) (1) | $125 - $127 | $547 - $555 | |||||||||
Non-GAAP earnings per share (2) | ($0.11) - ($0.07) | $0.03 - $0.09 | |||||||||
(1) Following a successful completion of its Voxbone integration efforts, a strategic organization of its go-to-market, operating and development functions in first quarter 2022, and recently concluded or ongoing non-core business divestments, Bandwidth has aligned its operating segment during
2
first quarter 2022 to focus exclusively on its global CPaaS market opportunity. Accordingly, segment disclosure going forward along with the company’s financial outlooks and results will reflect the company’s singular CPaaS market focus.
(2) Assumes weighted average share count of approximately 31.2 million in 1Q 2022 and weighted average diluted share count of 31.3 million in FY 2022. Bandwidth adopted ASU 2020-06 on January 1, 2022 using modified retrospective method and accounted for our convertible notes due 2026 and 2028 on a whole-instrument basis. Upon adoption, diluted EPS is calculated using the "If-Converted Method" which results in an increase in weighted average diluted shares count of 4.8 million shares.
Bandwidth has not reconciled its first quarter and full-year guidance related to non-GAAP net earnings or loss to GAAP net earnings or loss and non-GAAP earnings or loss per share to GAAP earnings 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
•Morgan Stanley Technology, Media & Telecom Conference in San Francisco, CA on Wednesday, March 9.
Live webcasts and replays of the fireside chat will be available on the Investor Relations section of the company’s website at https://investors.bandwidth.com.
About Bandwidth Inc.
Bandwidth (NASDAQ: BAND) is a global communications software company that helps enterprises connect people around the world with cloud-ready voice, messaging, and emergency services. Backed by the largest directly-connected network on the planet, companies like Cisco, Google, Microsoft, RingCentral, Uber and Zoom use Bandwidth's APIs to easily embed communications into software and applications. Bandwidth has more than 20 years in the technology space and is the first and only Communications Platform-as-a-Service (CPaaS) provider offering a robust selection of APIs built around our own global network. Our award-winning support teams help businesses around the world solve complex communications challenges every day. More information available at www.bandwidth.com.
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 first quarter 2022 and full-year 2022, attractiveness of our product offerings, our platform, the value proposition of our products, and our assessment of the impact of the distributed denial of service ("DDoS") attacks discussed herein and in previous press releases 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, legal, reputational and financial risks which may result from the DDoS attacks or other cybersecurity incidents, risks that the anticipated benefits of the acquisition of Voxbone may not be fully realized or may take longer to realize than expected, 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 latest Form 10-K filed with the Securities and Exchange Commission and any subsequent reports that we file with the Securities and Exchange Commission. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time. It is not possible for our management to predict all risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties and assumptions, we cannot guarantee future results, levels of activity, performance, achievements or events and circumstances reflected in the forward-looking statements will occur. We are under no obligation to update any of these forward-looking statements after the date of this press release to conform these statements to actual results or revised expectations, except as required by law. You should, therefore, not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this press release.
Non-GAAP Financial Measures
3
To supplement our consolidated financial statements, which are prepared and presented in accordance with Generally Accepted Accounting Principles in the United States, or GAAP, we provide investors with certain non-GAAP financial measures and other business metrics, which we believe are helpful to our investors. We use these Non-GAAP financial measures and other business metrics for financial and operational decision-making purposes and as a means to evaluate period-to-period comparisons. We believe that these Non-GAAP financial measures and other business metrics 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.
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, 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, such as depreciation, amortization of acquired intangible assets related to acquisitions 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 (loss) income as net (loss) income adjusted for certain items affecting period to period comparability. Non-GAAP net (loss) income excludes stock-based compensation, amortization of acquired intangible assets, amortization of debt discount and issuance costs for convertible debt, acquisition related expenses, impairment charges of intangibles assets, loss (gain) on disposal of property and equipment, net cost associated with early lease terminations and leases without economic benefit, estimated tax impact of above adjustments, income tax (benefit) provision resulting from excess tax benefits associated with the exercise of stock options, vesting of restricted stock units and equity compensation, and expense resulting from recording the valuation allowance on our deferred tax assets (“DTA”).
We define adjusted EBITDA as net (loss) income 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, loss (gain) from disposal of property and equipment and net cost associated with early lease terminations and leases without economic benefit. 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 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.
4
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 $100 of revenue in the last month of the period. We believe that the use of our platform by active CPaaS customer accounts at or above the $100 per month threshold is a stronger indicator of potential future engagement than trial usage of our platform at levels below $100 per month. A single organization may constitute multiple unique active CPaaS customer accounts if it has multiple unique account identifiers, each of which is treated as a separate active CPaaS customer account.
Our dollar-based net retention rate compares the CPaaS revenue from customers in a quarter to the same quarter in the prior year. Customers of acquired businesses are included in the subsequent year’s calendar quarter of acquisition. 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.
5
BANDWIDTH INC.
Condensed Consolidated Statements of Operations
(In thousands, except share and per share amounts)
(Unaudited)
| Three months ended December 31, | Year ended December 31, | ||||||||||||||||||||||
| 2020 | 2021 | 2020 | 2021 | ||||||||||||||||||||
| Revenue | $ | 113,047 | $ | 126,132 | $ | 343,113 | $ | 490,907 | |||||||||||||||
| Cost of revenue | 61,357 | 72,602 | 185,252 | 272,384 | |||||||||||||||||||
| Gross profit | 51,690 | 53,530 | 157,861 | 218,523 | |||||||||||||||||||
| Operating expenses: | |||||||||||||||||||||||
| Research and development | 12,743 | 15,664 | 42,059 | 55,173 | |||||||||||||||||||
| Sales and marketing | 13,479 | 13,649 | 40,552 | 51,817 | |||||||||||||||||||
| General and administrative | 37,685 | 28,289 | 88,755 | 113,770 | |||||||||||||||||||
| Total operating expenses | 63,907 | 57,602 | 171,366 | 220,760 | |||||||||||||||||||
| Operating loss | (12,217) | (4,072) | (13,505) | (2,237) | |||||||||||||||||||
| Other expense, net | (6,487) | (8,190) | (15,467) | (28,958) | |||||||||||||||||||
| Loss before income taxes | (18,704) | (12,262) | (28,972) | (31,195) | |||||||||||||||||||
| Income tax (provision) benefit | (1,222) | 4,088 | (15,005) | 3,833 | |||||||||||||||||||
| Net loss | $ | (19,926) | $ | (8,174) | $ | (43,977) | $ | (27,362) | |||||||||||||||
| Net loss per share, basic and diluted | $ | (0.81) | $ | (0.33) | $ | (1.83) | $ | (1.09) | |||||||||||||||
| Weighted average number of common shares outstanding, basic and diluted | 24,650,258 | 25,135,355 | 24,092,574 | 25,090,916 | |||||||||||||||||||
The Company recognized total stock-based compensation expense as follows:
| Three months ended December 31, | Year ended December 31, | ||||||||||||||||||||||
| 2020 | 2021 | 2020 | 2021 | ||||||||||||||||||||
| (In thousands) | |||||||||||||||||||||||
| Cost of revenue | $ | 47 | $ | 62 | $ | 208 | $ | 252 | |||||||||||||||
| Research and development | 537 | 593 | 2,118 | 2,648 | |||||||||||||||||||
| Sales and marketing | 385 | 299 | 1,525 | 1,890 | |||||||||||||||||||
| General and administrative | 1,606 | 1,991 | 6,030 | 9,747 | |||||||||||||||||||
| Total | $ | 2,575 | $ | 2,945 | $ | 9,881 | $ | 14,537 | |||||||||||||||
6
BANDWIDTH INC.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
| As of December 31, | As of December 31, | ||||||||||
| 2020 | 2021 | ||||||||||
| Assets | |||||||||||
| Current assets: | |||||||||||
| Cash and cash equivalents | $ | 72,163 | $ | 331,453 | |||||||
| Restricted cash | 9,274 | 836 | |||||||||
| Other investments | 40,000 | — | |||||||||
| Accounts receivable, net of allowance for doubtful accounts | 55,243 | 61,572 | |||||||||
| Deferred costs | 2,411 | 3,204 | |||||||||
| Prepaid expenses and other current assets | 14,508 | 15,820 | |||||||||
| Total current assets | 193,599 | 412,885 | |||||||||
| Property and equipment, net | 51,645 | 69,604 | |||||||||
| Operating right-of-use asset, net | 19,491 | 14,061 | |||||||||
| Intangible assets, net | 248,055 | 211,217 | |||||||||
| Deferred costs, non-current | 3,604 | 4,676 | |||||||||
| Other long-term assets | 1,975 | 8,673 | |||||||||
| Goodwill | 372,239 | 344,423 | |||||||||
| Total assets | $ | 890,608 | $ | 1,065,539 | |||||||
| Liabilities and stockholders’ equity | |||||||||||
| Current liabilities: | |||||||||||
| Accounts payable | $ | 11,665 | $ | 9,142 | |||||||
| Accrued expenses and other current liabilities | 63,065 | 65,921 | |||||||||
| Current portion of deferred revenue | 6,515 | 6,248 | |||||||||
| Advanced billings | 5,429 | 6,380 | |||||||||
| Operating lease liability, current | 5,515 | 5,807 | |||||||||
| Total current liabilities | 92,189 | 93,498 | |||||||||
| Other liabilities | 1,707 | 6,018 | |||||||||
| Operating lease liability, net of current portion | 17,202 | 10,958 | |||||||||
| Deferred revenue, net of current portion | 6,386 | 7,634 | |||||||||
| Deferred tax liability | 61,005 | 48,396 | |||||||||
| Convertible senior notes | 282,196 | 486,440 | |||||||||
| Total liabilities | 460,685 | 652,944 | |||||||||
| Stockholders’ equity: | |||||||||||
| Class A and Class B common stock | 24 | 25 | |||||||||
| Additional paid-in capital | 451,463 | 502,477 | |||||||||
| Accumulated deficit | (49,505) | (76,867) | |||||||||
| Accumulated other comprehensive income (loss) | 27,941 | (13,040) | |||||||||
| Total stockholders’ equity | 429,923 | 412,595 | |||||||||
| Total liabilities and stockholders’ equity | $ | 890,608 | $ | 1,065,539 | |||||||
7
BANDWIDTH INC.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
| Year ended December 31, | |||||||||||
| 2020 | 2021 | ||||||||||
| Cash flows from operating activities | |||||||||||
| Net loss | $ | (43,977) | $ | (27,362) | |||||||
| Adjustments to reconcile net loss to net cash provided by operating activities | |||||||||||
| Depreciation and amortization | 16,803 | 36,642 | |||||||||
| Right-of-use asset amortization | 4,812 | 5,722 | |||||||||
| Amortization of debt discount and issuance costs | 15,647 | 26,754 | |||||||||
| Stock-based compensation | 9,881 | 14,537 | |||||||||
| Deferred taxes | 14,266 | (8,318) | |||||||||
| Loss on disposal of property and equipment | 334 | 832 | |||||||||
| Changes in operating assets and liabilities: | |||||||||||
| Accounts receivable, net of allowances | (18,832) | (6,711) | |||||||||
| Prepaid expenses and other assets | (3,823) | (6,751) | |||||||||
| Accounts payable | 315 | 1,992 | |||||||||
| Accrued expenses and other liabilities | 14,393 | 9,693 | |||||||||
| Operating right-of-use liability | (5,301) | (6,227) | |||||||||
| Net cash provided by operating activities from continuing operations | 4,518 | 40,803 | |||||||||
| Cash flows from investing activities | |||||||||||
| Purchase of property and equipment | (12,273) | (20,686) | |||||||||
| Capitalized software development costs | (2,319) | (3,926) | |||||||||
| Purchase of land | — | (30,017) | |||||||||
| Proceeds from sale of land | — | 17,462 | |||||||||
| Purchase of other investments | (230,780) | — | |||||||||
| Proceeds from sales and maturities of other investments | 190,780 | 40,000 | |||||||||
| Acquisition, net of cash acquired | (400,493) | — | |||||||||
| Net cash (used in) provided by investing activities | (455,085) | 2,833 | |||||||||
| Cash flows from financing activities | |||||||||||
| Payments on finance leases | (28) | (212) | |||||||||
| Proceeds from issuance of convertible senior notes | 400,000 | 250,000 | |||||||||
| Purchase of capped call | (43,320) | (25,500) | |||||||||
| Payment of Acquisition holdback | — | (6,689) | |||||||||
| Payment of debt issuance costs | (11,990) | (7,544) | |||||||||
| Proceeds from exercises of stock options | 4,073 | 926 | |||||||||
| Value of equity awards withheld for tax liabilities | (1,844) | (3,954) | |||||||||
| Net cash provided by financing activities | 346,891 | 207,027 | |||||||||
| Effect of exchange rate changes on cash, cash equivalents and restricted cash | 109 | 189 | |||||||||
| Net (decrease) increase in cash, cash equivalents, and restricted cash | (103,567) | 250,852 | |||||||||
| Cash, cash equivalents, and restricted cash, beginning of period | 185,004 | 81,437 | |||||||||
| Cash, cash equivalents, and restricted cash, end of period | $ | 81,437 | $ | 332,289 | |||||||
8
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 December 31, | Year ended December 31, | ||||||||||||||||||||||
| 2020 | 2021 | 2020 | 2021 | ||||||||||||||||||||
| Consolidated Gross Profit | $ | 51,690 | $ | 53,530 | $ | 157,861 | $ | 218,523 | |||||||||||||||
| Consolidated Gross Profit Margin % | 46 | % | 42 | % | 46 | % | 45 | % | |||||||||||||||
| Depreciation | 2,578 | 3,104 | 9,536 | 12,051 | |||||||||||||||||||
| Amortization of acquired intangible assets | 1,445 | 2,064 | 1,445 | 8,543 | |||||||||||||||||||
| Stock-based compensation | 47 | 62 | 208 | 252 | |||||||||||||||||||
| Non-GAAP Gross Profit | $ | 55,760 | $ | 58,760 | $ | 169,050 | $ | 239,369 | |||||||||||||||
| Non-GAAP Gross Margin % | 49 | % | 47 | % | 49 | % | 49 | % | |||||||||||||||
By Segment
CPaaS
| Three months ended December 31, | Year ended December 31, | ||||||||||||||||||||||
| 2020 | 2021 | 2020 | 2021 | ||||||||||||||||||||
| CPaaS Gross Profit | $ | 45,892 | $ | 48,600 | $ | 137,384 | $ | 196,545 | |||||||||||||||
| CPaaS Gross Profit Margin % | 47 | % | 48 | % | 46 | % | 47 | % | |||||||||||||||
| Depreciation | 2,578 | 3,104 | 9,536 | 12,051 | |||||||||||||||||||
| Amortization of acquired intangible assets | 1,445 | 2,064 | 1,445 | 8,543 | |||||||||||||||||||
| Stock-based compensation | 47 | 62 | 208 | 252 | |||||||||||||||||||
| Non-GAAP CPaaS Gross Profit | $ | 49,962 | $ | 53,830 | $ | 148,573 | $ | 217,391 | |||||||||||||||
| Non-GAAP CPaaS Gross Margin % | 51 | % | 53 | % | 50 | % | 53 | % | |||||||||||||||
Other
There are no non-GAAP adjustments to gross profit for the Other segment.
9
BANDWIDTH INC.
Reconciliation of Non-GAAP Financial Measures
(In thousands, except share and per share amounts)
(Unaudited)
Non-GAAP Net Income
| Three months ended December 31, | Year ended December 31, | ||||||||||||||||||||||
| 2020 | 2021 | 2020 | 2021 | ||||||||||||||||||||
| Net loss | $ | (19,926) | $ | (8,174) | $ | (43,977) | $ | (27,362) | |||||||||||||||
| Stock-based compensation | 2,575 | 2,945 | 9,881 | 14,537 | |||||||||||||||||||
| Amortization of acquired intangibles | 3,276 | 4,624 | 3,666 | 19,119 | |||||||||||||||||||
| Amortization of debt discount and issuance costs for convertible debt | 4,713 | 7,279 | 15,565 | 26,672 | |||||||||||||||||||
| Acquisition-related expenses | 12,713 | — | 14,458 | — | |||||||||||||||||||
| Loss on disposal of property and equipment | 71 | 475 | 334 | 832 | |||||||||||||||||||
Estimated tax effects of adjustments (1) | (758) | (11,534) | (758) | (15,036) | |||||||||||||||||||
Valuation allowance (2) | 851 | 9,337 | 15,024 | 9,552 | |||||||||||||||||||
| Income tax benefit of option exercises | — | (2,603) | — | (2,603) | |||||||||||||||||||
| Non-GAAP net income | $ | 3,515 | $ | 2,349 | $ | 14,193 | $ | 25,711 | |||||||||||||||
| Net loss per share, basic and diluted | $ | (0.81) | $ | (0.33) | $ | (1.83) | $ | (1.09) | |||||||||||||||
| Non-GAAP net income per Non-GAAP share | |||||||||||||||||||||||
| Basic | $ | 0.14 | $ | 0.09 | $ | 0.59 | $ | 1.02 | |||||||||||||||
| Diluted | $ | 0.13 | $ | 0.09 | $ | 0.55 | $ | 0.97 | |||||||||||||||
| Non-GAAP weighted average number of shares outstanding | |||||||||||||||||||||||
| Non-GAAP basic shares | 24,650,258 | 25,135,355 | 24,092,574 | 25,090,916 | |||||||||||||||||||
| Convertible debt conversion | 1,967,546 | — | 1,022,941 | 987,149 | |||||||||||||||||||
| Stock options issued and outstanding | 243,936 | 157,658 | 443,738 | 180,318 | |||||||||||||||||||
| Nonvested RSUs outstanding | 353,367 | 70,650 | 352,854 | 197,538 | |||||||||||||||||||
| Non-GAAP diluted shares | 27,215,107 | 25,363,663 | 25,912,107 | 26,455,921 | |||||||||||||||||||
________________________
(1) The Non-GAAP tax-effect adjustments are calculated based on statutory tax rates in the jurisdictions where the Company has tax filings. When the Company has a valuation allowance recorded and no tax benefits will be recognized, the rate in that jurisdiction is considered to be zero. The rate was 1.8% and 13.2% for the years ended December 31, 2020 and 2021, respectively.
(2) The Company recognized a tax expense of $15.0 million and $9.6 million to record a valuation allowance on U.S. deferred tax assets in the years ended December 31, 2020 and 2021, respectively.
10
BANDWIDTH INC.
Reconciliation of Non-GAAP Financial Measures
(In thousands, except share and per share amounts)
(Unaudited)
Adjusted EBITDA
| Three months ended December 31, | Year ended December 31, | ||||||||||||||||||||||
| 2020 | 2021 | 2020 | 2021 | ||||||||||||||||||||
| Net loss | $ | (19,926) | $ | (8,174) | $ | (43,977) | $ | (27,362) | |||||||||||||||
Income tax provision (benefit) (1) | 1,222 | (4,088) | 15,005 | (3,833) | |||||||||||||||||||
| Interest expense, net | 4,749 | 7,960 | 13,672 | 28,784 | |||||||||||||||||||
| Depreciation | 3,600 | 4,540 | 13,137 | 17,523 | |||||||||||||||||||
| Amortization | 3,276 | 4,624 | 3,666 | 19,119 | |||||||||||||||||||
| Acquisition-related expenses | 12,713 | — | 14,458 | — | |||||||||||||||||||
| Stock-based compensation | 2,575 | 2,945 | 9,881 | 14,537 | |||||||||||||||||||
| Loss on disposal of property and equipment | 71 | 475 | 334 | 832 | |||||||||||||||||||
| Adjusted EBITDA | $ | 8,280 | $ | 8,282 | $ | 26,176 | $ | 49,600 | |||||||||||||||
________________________
(1) Includes $15.0 million and $9.6 million of tax expense to record a valuation allowance on U.S. deferred tax assets in the years ended December 31, 2020 and 2021, respectively.
Free Cash Flow
| Three months ended December 31, | Year ended December 31, | ||||||||||||||||||||||
| 2020 | 2021 | 2020 | 2021 | ||||||||||||||||||||
| Net cash (used in) provided by operating activities | $ | (6,813) | $ | 17,115 | $ | 4,518 | $ | 40,803 | |||||||||||||||
Net cash used in investing in capital assets (1) (2) | (3,210) | (8,848) | (14,592) | (37,167) | |||||||||||||||||||
| Free cash flow | $ | (10,023) | $ | 8,267 | $ | (10,074) | $ | 3,636 | |||||||||||||||
________________________
(1) Represents the acquisition cost of property, equipment and capitalized development costs for software for internal use.
(2) Includes the net cash used from the purchase of land of $(30.0) million offset by the proceeds from sale of land of $17.5 million from investing activities of the statement of cash flows for the year ended December 31, 2021.
11