View:
United States securities and exchange commission logo
July 6, 2022
David Morken
Chief Executive Officer
Bandwidth Inc.
900 Main Campus Drive
Raleigh, NC 27606
Re: Bandwidth Inc.
Form 10-K for the
Fiscal Year Ended December 31, 2021
Filed on February
25, 2022
Form 10-Q for the
Quarter Ended March 31, 2022
Filed on May 6,
2022
File No. 001-38285
Dear Mr. Morken:
We have limited our review of your filing to the financial
statements and related
disclosures and have the following comments. In some of our comments, we
may ask you to
provide us with information so we may better understand your disclosure.
Please respond to these comments within ten business days by
providing the requested
information or advise us as soon as possible when you will respond. If
you do not believe our
comments apply to your facts and circumstances, please tell us why in
your response.
After reviewing your
response to these comments, we may have additional comments.
Form 10-K for the Fiscal Year Ended December 31, 2021
Item 1A. Risk Factors
Our second amended and restated bylaws provide, subject to certain
exceptions..., page 56
1. We note that your forum
selection provision in your bylaws identifies the Court of
Chancery of the State
of Delaware (or, in the event that the Chancery Court does not have
jurisdiction, the
federal district court for the District of Delaware or other state courts of
the State of Delaware)
as the exclusive forum for certain litigation, including any
derivative action.
Please disclose whether this provision applies to actions arising under
the Securities Act or
Exchange Act. If the provision applies to Securities Act claims, in
future filings, please
clearly describe any risks to investors related to the provision and
also disclose that
there is uncertainty as to whether a court would enforce such provision
and that investors
cannot waive compliance with the federal securities laws and the rules
David Morken
Bandwidth Inc.
July 6, 2022
Page 2
and regulations thereunder. If the provision does not apply to actions
arising under
the Securities Act or Exchange Act please revise in future filings to
clearly indicate that
the provision does not apply to any actions arising under the
Securities Act or Exchange
Act.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Comparison of the Years Ended December 31, 2020 and 2021, page 69
2. You state that the increase in your effective tax rate from fiscal
2020 to 2021 is primarily
due to a change in the valuation allowance related to certain deferred
tax assets. However,
based on the reconciliation of your effective tax rate on page 132,
there appear to be other
factors besides the valuation allowance that contributed to the change
in your tax
provision during this period. Please revise to include a quantified
discussion of each of
the factors that contributed significantly to your tax provision
(benefit) and discuss any
material items that are not expected to impact your effective tax rate
in the future. Refer
to Item 303 of Regulation S-K. In addition, revise your footnote
disclosures to include a
discussion regarding the nature of each significant reconciling item
disclosed. Refer to
ASC 740-10-50-12.
Liquidity and Capital Resources, page 73
3. Please revise to include the reasons for the changes in amounts
impacting your cash
flow. In this regard, your discussion should not merely repeat
numerical data contained in
the financial statements. Refer to Instruction 2 to paragraph (b) in
Item 303 of Regulation
S-K.
Non-GAAP Financial Measures, page 76
4. Please revise to present both basic and diluted GAAP weighted average
shares
outstanding with equal or greater prominence to your non-GAAP measures
of weighted
average shares outstanding. Similarly, revise the key performance
indicators discussion on
page 64 to ensure that the comparable GAAP measures are presented with
equal or greater
prominence to the non-GAAP measures included in such table. Refer to
Item
10(e)(1)(i)(a) of Regulation S-K and Question 102.10 of the Non-GAAP
Compliance
and Disclosure Interpretations (C&DIs)
5. Please explain further the valuation allowance adjustment to your
measure of non-GAAP
net income (loss). In this regard, as per footnote (1) on page 79, you
appear to factor the
valuation allowance into your determination of the tax rate used for
non-GAAP purposes
and yet you also adjust GAAP net loss to remove the impact of such
valuation. Explain
further what the valuation allowance adjustment represents and how such
adjustment is
FirstName LastNameDavid Morken
appropriate for non-GAAP purposes. Clarify which jurisdictions are
impacted by the
Comapany NameBandwidth
valuation Inc.tell us the impact on the non-GAAP tax rates
for such
allowance and
July 6, jurisdictions.
2022 Page 2
FirstName LastName
David Morken
FirstName
Bandwidth LastNameDavid Morken
Inc.
Comapany
July 6, 2022NameBandwidth Inc.
July 6,3 2022 Page 3
Page
FirstName LastName
Nots to Consolidated Financial Statements
Notes 2. Summary of Significant Accounting Policies
Goodwill, page 102
6. You state that management may choose to proceed directly to the
two-step evaluation in
assessing goodwill for impairment, however, it appears from your
December 31, 2020
Form 10-K that you adopted ASU 2017-04. Please tell us how your
current policy
complies with ASC 350-20-35 or revise as necessary. In addition, tell
us how you
considered the subsequent decline in the trading price of your common
stock in
determining whether goodwill should be tested for impairment between
annual
tests. Refer to ASC 350-20-35-3C and 35-30. Similarly, tell us your
consideration to
include a discussion of such decline and the potential impact on your
goodwill evaluation
in your fiscal 2022 Form 10-Q filings.
Form 10-Q for the Quarter Ended March 31, 2022
Management's Discussion and Analysis
Non-GAAP Financial Measures, page 45
7. We note that you revised your calculation of non-GAAP gross profit
margin in the first
quarter of fiscal 2022 such that it is now calculated using revenue
less pass-through
messaging surcharges. Please tell us how you considered whether this
results in the
presentation of a non-GAAP measure that substitutes individually
tailored recognition and
measurement methods for those of GAAP, or revise as necessary. Refer
to Question
100.04 of the Non-GAAP C&DIs. In your response, please explain further
to us what the
messaging surcharge revenues represent.
In closing, we remind you that the company and its management are
responsible for the
accuracy and adequacy of their disclosures, notwithstanding any review,
comments, action or
absence of action by the staff.
You may contact Megan Akst, Senior Staff Accountant, at (202) 551-3407
or Kathleen
Collins, Accounting Branch Chief, at (202) 551-3599 with any questions.
Sincerely,
Division of
Corporation Finance
Office of
Technology
cc: Brandon Asbill