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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________

FORM 10-Q
__________________________________
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                 to
Commission File Number: 001-38285 
BANDWIDTH INC.
(Exact name of registrant as specified in its charter)
__________________________________
 
Delaware56-2242657
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification Number)
900 Main Campus Drive
Raleigh, NC 27606
(Address of principal executive offices) (Zip Code) 
(800) 808-5150
(Registrant’s telephone number, including area code)
__________________________________

Securities Registered Pursuant to Section 12(b) of the Act:
Title of each classTrading Symbol(s)Name of each exchange on which registered
Class A Common Stock, par value $0.001 per shareBANDNASDAQ Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.  Yes  x No 
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).  Yes x  No 
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
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.     
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes   No 
As of July 29, 2022, 23,338,746 shares of the registrant’s Class A common stock and 1,965,170 shares of registrant’s Class B common stock were outstanding, respectively.




BANDWIDTH INC.
Table of Contents
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Table of Contents
Special Note Regarding Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (the “Securities Act”) and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements contained in this Quarterly Report on Form 10-Q, other than statements of historical fact, are forward-looking statements. Forward-looking statements generally can be identified by the words “may,” “will,” “expect,” “believe,” “anticipate,” “intend,” “could,” “would,” “project,” “plan,” “estimate,” or “continue,” or the negative of these words or other similar terms or expressions that concern our expectations strategy, plans or intentions. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:
our expectations about the impact of public health epidemics, such as COVID-19 (as defined herein), or natural disasters on the global economy and our business, results of operations and financial condition;
our ability to attract and retain customers, including large enterprises;
our approach to identifying, attracting and keeping new and existing customers, as well as our expectations regarding customer turnover;
our beliefs regarding network traffic growth and other trends related to the usage of our products and services;
our ability to successfully defend our network, systems and data against ever-evolving cybersecurity threats, including denial-of-service and ransomware attacks;
our expectations regarding revenue, costs, expenses, gross margin, dollar based net retention rate, adjusted EBITDA, non-generally accepted accounting principles in the United States of America (“GAAP”) net income and capital expenditures;
our beliefs regarding the growth of our business and how that impacts our liquidity and capital resources requirements;
our beliefs regarding the impact of macroeconomic conditions, including inflationary and/or recessionary pressures, on our business and financial condition;
the sufficiency of our cash and cash equivalents to meet our liquidity needs;
our ability to attract, train, and retain qualified employees and key personnel;
our beliefs regarding the expense and productivity of and competition for our sales force;
our expectations regarding headcount;
our ability to maintain and benefit from our corporate culture;
our plans to further invest in and grow our business, including international offerings, and our ability to effectively manage our growth and associated investments;
our ability to introduce new products and services and enhance existing products and services;
our ability to successfully integrate and benefit from any strategic acquisitions, including our acquisition of Voxbone (as defined herein), or future strategic acquisitions or investments;
our ability to effectively manage our international operations and expansion;
our ability to compete successfully against current and future competitors;
the evolution of technology affecting our products, services and markets;
3

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the impact of certain new accounting standards and guidance, as well as the time and cost of continued compliance with existing rules and standards;
our beliefs regarding the use of Non-GAAP financial measures;
our ability to comply with modified or new industry standards, laws and regulations applicable to our products, services and business, including the General Data Protection Regulation (“GDPR”), the California Consumer Privacy Act of 2018 and other privacy regulations that may be implemented in the future, and Secure Telephone Identity Revisited and Signature-based Handling of Asserted Information Using toKENs and other robocalling prevention and anti-spam standards and increased costs associated with such compliance;
the impact of our customers’ violation of our policies or other misuse of our platform;
our ability to manage fees that have been or may be instituted by network providers that increase our costs;
our ability to maintain, protect and enhance our intellectual property;
our expectations regarding litigation and other pending or potential disputes;
our ability to service the interest on our Convertible Notes (as defined herein) and repay such Convertible Notes, to the extent required; and
other risks related to our indebtedness.
We caution you that the foregoing list may not contain all the forward-looking statements made in this Quarterly Report on Form 10-Q.
You should not rely upon forward-looking statements as predictions of future events. We have based the forward-looking statements contained in this Quarterly Report on Form 10-Q primarily on our current expectations and projections about future events and trends that we believe may affect our business, financial condition, results of operations and prospects. The outcome of the events described in these forward-looking statements is subject to risks, uncertainties and other factors described in the section titled “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q. Moreover, we operate in a very competitive and rapidly changing environment. New risks and uncertainties emerge from time to time and it is not possible for us to predict all risks and uncertainties that could have an impact on the forward-looking statements contained in this Quarterly Report on Form 10-Q. We cannot assure you that the results, events and circumstances reflected in the forward-looking statements will be achieved or occur, and actual results, events or circumstances could differ materially from those described in the forward-looking statements.
The forward-looking statements made in this Quarterly Report on Form 10-Q relate only to events as of the date on which the statements are made. We undertake no obligation to update any forward-looking statements made in this Quarterly Report on Form 10-Q to reflect events or circumstances after the date of this Quarterly Report on Form 10-Q or to reflect new information or the occurrence of unanticipated events, except as required by law. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements and you should not place undue reliance on our forward-looking statements. Our forward-looking statements do not reflect the potential impact of any future acquisitions, mergers, dispositions, joint ventures or investments we may make.

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PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

BANDWIDTH INC.
Condensed Consolidated Balance Sheets
(In thousands)
(Unaudited)
As of June 30,As of December 31,
20222021
Assets
Current assets:
Cash and cash equivalents$165,310 $331,453 
Restricted cash884 836 
Marketable securities137,562  
Accounts receivable, net of allowance for doubtful accounts76,618 61,572 
Deferred costs3,873 3,204 
Prepaid expenses and other current assets20,366 15,820 
Total current assets404,613 412,885 
Property, plant and equipment, net69,459 69,604 
Operating right-of-use asset, net13,211 14,061 
Intangible assets, net185,855 211,217 
Deferred costs, non-current5,081 4,676 
Other long-term assets28,361 8,673 
Goodwill317,736 344,423 
Total assets$1,024,316 $1,065,539 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable$19,543 $9,142 
Accrued expenses and other current liabilities62,329 65,921 
Current portion of deferred revenue6,520 6,248 
Advanced billings6,184 6,380 
Operating lease liability, current7,136 5,807 
Total current liabilities101,712 93,498 
Other liabilities8,081 6,018 
Operating lease liability, net of current portion8,527 10,958 
Deferred revenue, net of current portion8,310 7,634 
Deferred tax liability41,373 48,396 
Convertible senior notes636,474 486,440 
Total liabilities804,477 652,944 
Stockholders’ equity:
Class A and Class B common stock25 25 
Additional paid-in capital354,662 502,477 
Accumulated deficit(81,179)(76,867)
Accumulated other comprehensive loss(53,669)(13,040)
Total stockholders’ equity219,839 412,595 
Total liabilities and stockholders’ equity$1,024,316 $1,065,539 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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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,
2022202120222021
Revenue$136,489 $120,658 $267,853 $234,137 
Cost of revenue81,085 67,177 157,035 129,498 
Gross profit55,404 53,481 110,818 104,639 
Operating expenses:
Research and development24,264 16,390 46,691 33,179 
Sales and marketing23,327 20,205 46,479 39,315 
General and administrative16,863 15,952 33,568 31,248 
Total operating expenses64,454 52,547 126,738 103,742 
Operating (loss) income(9,050)934 (15,920)897 
Other income (expense), net2,385 (7,590)2,620 (13,201)
Loss before income taxes(6,665)(6,656)(13,300)(12,304)
Income tax benefit (provision)417 (272)238 60 
Net loss$(6,248)$(6,928)$(13,062)$(12,244)
Net loss per share, basic and diluted$(0.25)$(0.28)$(0.52)$(0.49)
Weighted average number of common shares outstanding, basic and diluted25,279,615 25,096,026 25,249,998 25,056,208 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.

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BANDWIDTH INC.
Condensed Consolidated Statements of Comprehensive Loss
(In thousands)
(Unaudited)
Three months ended June 30,Six months ended June 30,
2022202120222021
Net loss$(6,248)$(6,928)$(13,062)$(12,244)
Other comprehensive (loss) income
Unrealized loss on marketable securities, net of income taxes(338) (338) 
Foreign currency translation, net of income taxes(29,775)6,015 (40,291)(17,170)
Other comprehensive (loss) income(30,113)6,015 (40,629)(17,170)
Total comprehensive loss$(36,361)$(913)$(53,691)$(29,414)

The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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BANDWIDTH INC.
Condensed Consolidated Statements of Changes in Stockholders Equity
(In thousands, except share amounts)
(Unaudited)
Class A voting
common stock
Class B voting
common stock
Additional paid-in capitalAccumulated other comprehensive income (loss)Accumulated deficitTotal stockholders’ equity
SharesAmountSharesAmount
Balance at December 31, 202022,413,004 $22 2,496,125 $2 $451,463 $27,941 $(49,505)$429,923 
Issuance of debt conversion option— — — — 66,908 — — 66,908 
Debt conversion option issuance costs, net of tax— — — — (2,049)— — (2,049)
Capped call option purchase price— — — — (25,500)— — (25,500)
Exercises of vested stock options57,817 — — — 753 — — 753 
Vesting of restricted stock units141,707 — — — — — — — 
Equity awards withheld for tax liability(19,879)— — — (3,187)— — (3,187)
Conversion of Class B voting common stock to Class A voting common stock280,955 1 (280,955)— — — — 1 
Foreign currency translation— — — — — (23,185)— (23,185)
Stock-based compensation— — — — 4,390 — — 4,390 
Net loss— — — — — — (5,316)(5,316)
Balance at March 31, 202122,873,604 23 2,215,170 2 492,778 4,756 (54,821)442,738 
Debt conversion option issuance costs, net of tax— — — — 30 — — 30 
Exercises of vested stock options4,406 — — — 46 — — 46 
Vesting of restricted stock units15,605 — — — — — — — 
Equity awards withheld for tax liability(1,948)— — — (265)— — (265)
Foreign currency translation— — — — — 6,015 — 6,015 
Stock-based compensation— — — — 3,377 — — 3,377 
Net loss— — — — — — (6,928)(6,928)
Balance at June 30, 202122,891,667 23 2,215,170 2 495,966 10,771 (61,749)445,013 
Exercises of vested stock options8,700 — — — 101 — — 101 
Vesting of restricted stock units16,383 — — — — — — — 
Equity awards withheld for tax liability(1,631)— — — (154)— — (154)
Conversion of Class B voting common stock to Class A voting common stock250,000 — (250,000)— — — —  
Foreign currency translation— — — — — (12,512)— (12,512)
Stock-based compensation— — — — 3,825 — — 3,825 
Net loss— — — — — — (6,944)(6,944)
Balance at September 30, 202123,165,119 23 1,965,170 2 499,738 (1,741)(68,693)429,329 
Exercises of vested stock options3,062 — — — 23 — — 23 
Vesting of restricted stock units12,807 — — — — — — — 
Equity awards withheld for tax liability(3,000)— — — (229)— — (229)
Foreign currency translation— — — — — (11,468)— (11,468)
Unrealized gain/loss on employee benefit pension plan— — — — — 169 — 169 
Stock-based compensation— — — — 2,945 — — 2,945 
Net loss— — — — — — (8,174)(8,174)
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BANDWIDTH INC.
Condensed Consolidated Statements of Changes in Stockholders Equity
(In thousands, except share amounts)
(Unaudited)
Class A voting
common stock
Class B voting
common stock
Additional paid-in capitalAccumulated other comprehensive income (loss)Accumulated deficitTotal stockholders’ equity
SharesAmountSharesAmount
Balance at December 31, 202123,177,988 23 1,965,170 2 502,477 (13,040)(76,867)412,595 
Exercises of vested stock options16,095 — — — 125 — — 125 
Vesting of restricted stock units144,977 — — — — — — — 
Equity awards withheld for tax liability(30,029)— — — (1,751)— — (1,751)
Adjustment to opening retained earnings due to adoption of ASU 2020-06— — — — (156,248)— 8,750 (147,498)
Foreign currency translation— — — — — (10,516)— (10,516)
Stock-based compensation— — — — 5,346 — — 5,346 
Net loss— — — — — — (6,814)(6,814)
Balance at March 31, 202223,309,031 23 1,965,170 2 349,949 (23,556)(74,931)251,487 
Exercises of vested stock options4,287 — — — 37 — — 37 
Vesting of restricted stock units28,351 — — — — — — — 
Equity awards withheld for tax liability(7,005)— — — (145)— — (145)
Unrealized loss on marketable securities— — — — — (338)— (338)
Foreign currency translation— — — — — (29,775)— (29,775)
Stock-based compensation— — — — 4,821 — — 4,821 
Net loss— — — — — — (6,248)(6,248)
Balance at June 30, 202223,334,664 $23 1,965,170 $2 $354,662 $(53,669)$(81,179)$219,839 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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BANDWIDTH INC.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Six months ended June 30,
20222021
Cash flows from operating activities
Net loss$(13,062)$(12,244)
Adjustments to reconcile net loss to net cash provided by operating activities
Depreciation and amortization18,087 18,245 
Non-cash reduction to the right-of-use asset3,724 2,785 
Amortization of debt discount and issuance costs1,533 12,308 
Stock-based compensation10,167 7,767 
Deferred taxes and other(2,187)549 
Changes in operating assets and liabilities:
Accounts receivable, net of allowances(16,672)(8,159)
Prepaid expenses and other assets(10,497)(4,486)
Accounts payable11,742 1,118 
Accrued expenses and other liabilities1,433 (6,188)
Operating right-of-use liability(3,944)(2,850)
Net cash provided by operating activities324 8,845 
Cash flows from investing activities
Purchase of property and equipment(9,035)(7,703)
Deposits for construction in progress(14,545)(3,000)
Capitalized software development costs(1,231)(2,404)
Purchase of land (30,017)
Proceeds from sale of land 17,462 
Purchase of marketable securities(137,786) 
Proceeds from sales and maturities of other investments 40,000 
Net cash (used in) provided by investing activities(162,597)14,338 
Cash flows from financing activities
Payments on finance leases(126)(105)
Proceeds from issuance of convertible senior notes 250,000 
Purchase of Capped Call (25,500)
Payment of debt issuance costs(487)(7,544)
Proceeds from exercises of stock options162 802 
Value of equity awards withheld for tax liabilities(1,937)(3,456)
Net cash (used in) provided by financing activities(2,388)214,197 
Effect of exchange rate changes on cash, cash equivalents and restricted cash(1,434)204 
Net (decrease) increase in cash, cash equivalents, and restricted cash(166,095)237,584 
Cash, cash equivalents, and restricted cash, beginning of period332,289 81,437 
Cash, cash equivalents, and restricted cash, end of period$166,194 $319,021 
Supplemental disclosure of cash flow information
Cash paid for interest$1,280 $541 
Cash paid for taxes, net$528 $300 
Right-of-use assets obtained in exchange for new operating lease liabilities$3,404 $ 
Supplemental disclosure of noncash investing and financing activities
Purchase of property and equipment, accrued but not paid$778 $4,049 
Obligation included in basis of acquired land$ $7,752 
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BANDWIDTH INC.
Condensed Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Lease incentive$2,206 $3,193 
Obligation included in basis of land acquired by the Developer$ $4,512 
Equity awards withheld for tax liabilities, accrued but not paid$85 $242 
Unrealized loss on marketable securities, accrued but not realized$338 $ 
The accompanying notes are an integral part of these unaudited condensed consolidated financial statements.
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BANDWIDTH INC.
Notes to Condensed Consolidated Financial Statements
(Unaudited)

1. Organization and Description of Business
Bandwidth Inc. (together with its subsidiaries, “Bandwidth” or the “Company”) was founded in July 2000 and incorporated in Delaware on March 29, 2001. The Company’s headquarters are located in Raleigh, North Carolina. The Company is an international cloud-based, software-powered communications platform-as-a-service (“CPaaS”) provider that enables enterprises to create, scale and operate voice or messaging communications services across any mobile application or connected device.
As a result of certain changes in our business during the quarter ended March 31, 2022, the company re-evaluated its segment reporting and determined that one segment was appropriate, rather than the previously reported segments comprising “CPaaS” and “Other”. The primary drivers for this change were the company’s strategic alignment of its operating departments and the sale of legacy assets. All previously reported segment information has been recast to conform with the one segment structure.

2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States of America (“GAAP”) and applicable rules and regulations of the U.S. Securities and Exchange Commission (the “SEC”) regarding interim financial reporting. Certain information and disclosures normally included in the financial statements prepared in accordance with GAAP have been condensed or omitted pursuant to such rules and regulations. Therefore, these unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes included in the Company’s Annual Report on Form 10-K filed with the SEC on February 25, 2022.
The condensed consolidated balance sheet as of December 31, 2021, included herein, was derived from the audited financial statements as of that date, but does not include all disclosures, including certain notes required by GAAP on an annual reporting basis.
In the opinion of management, the accompanying unaudited condensed consolidated financial statements reflect all normal recurring adjustments necessary to present fairly the financial position, results of operations, comprehensive loss and cash flows for the interim periods, but are not necessarily indicative of the results of operations to be anticipated for the full year 2022 or any future period.
Cost Alignment
During the quarter ended March 31, 2022, the Company changed its presentation of certain costs to align with benchmarked definitions of cost of revenue, research and development, sales and marketing, and general and administrative expenses. As part of the benchmarked definitions, the Company has included allocations of facilities and shared IT costs based on employee headcount within the cost of revenue, research and development, sales and marketing, and general and administrative expense categories. Additionally, the product management function is now included in research and development rather than general and administrative as previously reported and the customer billing and collections function and the amortization of acquired customer relationship intangible assets are now included in sales and marketing rather than general and administrative as previously reported. Management believes use of the benchmarked definitions will increase comparability to peers and therefore usability of its financial statements.
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Notes to Condensed Consolidated Financial Statements (continued)