8-K

 

 

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) December 13, 2017

 

 

Bandwidth Inc.

(Exact name of registrant as specified in its charter)

 

 

 

Delaware   001-38285   56-2242657

(State or other jurisdiction

of incorporation)

 

(Commission

File Number)

 

(IRS Employer

Identification No.)

 

900 Main Campus Drive

Raleigh, NC

  27606
(Address of principal executive offices)   (Zip Code)

(800) 808-5150

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 (see General Instruction A.2. below):

 

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))

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 December 13, 2017, Bandwidth Inc. (“Bandwidth”) issued a press release reporting its financial results for the third quarter ended September 30, 2017. 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

99.1    Bandwidth Inc. press release, dated December 13, 2017


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: December 13, 2017

  By:   /s/ Jeffrey A. Hoffman
  Name:   Jeffrey A. Hoffman
  Title:   Chief Financial Officer
EX-99.1

Exhibit 99.1

Bandwidth Announces Third Quarter 2017 Financial Results

 

LOGO

 

 

RALEIGH, N.C., Dec. 13, 2017 /PRNewswire/ — Bandwidth Inc. (NASDAQ: BAND), a software company focused on communications for the enterprise, today announced financial results for the third quarter ended September 30, 2017.

“During the third quarter, we continued to benefit from growing enterprise demand to embed voice and messaging into software applications. We believe we are at the early stages of voice becoming the next major user interface, and Bandwidth stands to play a key enabling role as this market shift plays out over the next decade,” stated David Morken, chief executive officer of Bandwidth. “The unique combination of our API platform and all IP network continues to resonate with enterprise customers, and it positions us well to capitalize on the multi-billion dollar market opportunity ahead of us.”

Morken continued, “The recent completion of our initial public offering was an important milestone for our company. It further increases the market’s awareness of Bandwidth and provides additional resources to execute our growth strategy.”

Third Quarter 2017 Financial Highlights

 

    Revenue: Total revenue for the third quarter of 2017 was $41.3 million, compared to $38.6 million for the third quarter of 2016. Within total revenue, CPaaS revenue was $33.4 million, up 10% compared to $30.2 million for the third quarter of 2016. Other revenue contributed the remaining $7.9 million for the third quarter of 2017, compared to $8.4 million last year.

 

    Gross Profit: Gross profit for the third quarter of 2017 was $18.8 million, compared to $17.1 million for the third quarter of 2016. Non-GAAP gross profit for the third quarter of 2017 was $19.9 million, compared to $18.3 million for the third quarter of 2016. Gross margin for the third quarter of 2017 was 45%, compared to 44% for the third quarter of 2016. Non-GAAP gross margin was 48% for the third quarter of 2017, compared to 47% for the third quarter of 2016.

 

    Net Income: Net income from continuing operations attributable to common stockholders for the third quarter of 2017 was $1.4 million, or $0.11 per share, based on 13.3 million weighted average diluted shares outstanding. This compares to net income from continuing operations attributable to common stockholders of $3.5 million, or $0.27 per share, based on 12.8 million weighted average diluted shares outstanding for the third quarter of 2016.

Non-GAAP net income for the third quarter of 2017 was $2.2 million, or $0.15 per share, based on 15.0 million weighted average diluted shares outstanding. This compares to a non-GAAP net income of $3.7 million, or $0.25 per share, based on 14.6 million weighted average diluted shares outstanding for the third quarter of 2016.


    Adjusted EBITDA: Adjusted EBITDA was $5.2 million for the third quarter of 2017, compared to $6.2 million for the third quarter of 2016.

 

    Cash and Cash Flow: As of September 30, 2017, Bandwidth had cash and cash equivalents of $5.4 million and $38.5 million in debt. Subsequent to the end of the third quarter, Bandwidth closed its initial public offering of Class A common stock on November 14, 2017, which generated proceeds, net of underwriting discounts and commissions, to the Company of approximately $74.4 million, a portion of which was used to pay down all amounts outstanding under our term loan facility.

The Company generated $4.8 million in net cash provided by operating activities from continuing operations for the third quarter of 2017, compared to $2.2 million during the third quarter of 2016. The Company generated $2.7 million in free cash flow for the quarter, compared to $1.3 million for the third quarter of 2016.

Additional information regarding the non-GAAP financial measures discussed in this release, including an explanation of these measures and how they are calculated are 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.

Third Quarter 2017 Key Metrics

 

    The number of active CPaaS customers were 918 as of September 30, 2017, an increase of 18% from 781 as of September 30, 2016.

 

    The dollar-based net retention rate was 105% during the third quarter of 2017, compared to 112% during the third quarter of 2016 which primarily reflects our decision to curtail services to a competitor.

Financial Outlook

As of December 13, 2017, Bandwidth is providing guidance for its fourth quarter and full year 2017 as follows:

 

    Fourth Quarter 2017 Guidance: CPaaS revenue is expected to be in the range of $34.2 million to $34.7 million. Total revenue is expected to be in the range of $41.4 million to $41.9 million. Non-GAAP EPS is expected to be in the range of $0.00 to $0.01 per share, using 17.8 million weighted average diluted shares outstanding.

 

    Full Year 2017 Guidance: CPaaS revenue is expected to be in the range of $130.8 million to $131.3 million. Total revenue is expected to be in the range of $161.9 million to $162.4 million. Non-GAAP EPS is expected to be in the range $0.50 to $0.51 per share, using 16.1 million weighted average diluted shares outstanding.

Bandwidth has not reconciled its fourth quarter and full-year guidance related to non-GAAP net income to GAAP net income and non-GAAP EPS to GAAP EPS, 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 5:00 p.m. Eastern Time to review the Company’s financial results for the third quarter ended September 30, 2017. To access this call, dial (877) 407-0792 for the U.S. or Canada, or (201) 689-8263 for international callers. A live webcast of the conference call will be accessible from the Investors section of Bandwidth’s website at https://investors.bandwidth.com, and a recording will be archived and accessible at https://investors.bandwidth.com. An audio replay of this conference call will also be available through December 27, 2017, by dialing (844) 512-2921 for the U.S. or Canada, or (412) 317-6671 for international callers, and entering passcode 13674079.

About Bandwidth, Inc.

Bandwidth (NASDAQ: BAND) is a software company focused on communications for the enterprise. Companies like Google, Skype, and Ring Central use Bandwidth’s APIs to easily embed voice, messaging and 9-1-1 access into software and applications. Bandwidth is the first and only CPaaS provider offering a robust selection of communications APIs built around their own nationwide IP voice network—one of the largest in the nation. 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, statements regarding our future financial and business performance for the fourth quarter 2017 and full-year 2017, 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 prospectus related to the initial public offering (IPO), filed with the Securities and Exchange Commission pursuant to Rule 424(b)(4) under the Securities Act of 1933, as amended, on November 13, 2017 and 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

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 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 (loss) income as net income adjusted for certain items affecting period to period comparability. Non-GAAP net (loss) income excludes stock-based compensation, change in fair value of stockholders’ antidilutive arrangement, amortization of acquired intangible assets related to the Dash acquisition, impairment charges of intangibles assets, loss (gain) on disposal of property and equipment, and estimated tax impact of above adjustments.

We define adjusted EBITDA as net income or losses from continuing operations, adjusted to reflect the addition or elimination of certain income statement items including, but not limited to: income tax expense (benefit), interest expense, net, depreciation and amortization expense, stock-based compensation expense, impairment of intangible assets, loss (gain) from disposal of property and equipment, and change in fair value of financial instruments, including any change in shareholders’ anti-dilutive arrangements. We have presented Adjusted EBITDA because it is a key measure used by our management and board of directors to understand and evaluate our 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 cash flow provided by or used in operating activities from continuing operations, adjusted to include the acquisition of property, equipment and capitalized development costs for software for internal use. We have presented Free Cash Flow because it is a measure of the Company’s financial performance that represents the cash that the Company is able to generate after expenditures required to maintain or expand our asset base.

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 $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. 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.

CONDENSED CONSOLIDATED BALANCE SHEETS

(In Thousands)

(Unaudited)

 

     December 31,
2016
    September 30,
2017
 

Assets

    

Current assets:

    

Cash and cash equivalents

   $ 6,788     $ 5,366  

Accounts receivable, net of allowance for doubtful accounts

     16,838       18,702  

Prepaid expenses and other current assets

     4,416       6,157  
  

 

 

   

 

 

 

Total current assets

     28,042       30,225  

Property and equipment, net

     11,181       12,389  

Intangible assets, net

     8,482       7,853  

Deferred costs, non-current

     1,696       4,903  

Other long-term assets

     1,011       1,069  

Goodwill

     6,867       6,867  

Deferred tax asset

     12,694       9,244  
  

 

 

   

 

 

 

Total assets

   $ 69,973     $ 72,550  
  

 

 

   

 

 

 

Liabilities, redeemable convertible preferred stock and stockholders’ deficit

    

Current liabilities:

    

Accounts payable

   $ 4,688     $ 2,518  

Accrued expenses and other current liabilities

     14,649       15,783  
  

 

 

   

Current portion of deferred revenue and advanced billings

     4,032       4,710  
  

 

 

   

Line of credit, current portion

     5,000       —    

Current portion of long-term debt

     2,100       2,849  
  

 

 

   

 

 

 

Total current liabilities

     30,469       25,860  

Other liabilities, net of current portion

     611       1,431  

Deferred revenue, net of current portion

     1,711       2,439  

Long-term debt, net of current portion

     37,738       35,501  
  

 

 

   

 

 

 

Total liabilities

     70,529       65,231  

Redeemable convertible preferred stock

     21,818       21,818  

Commitments and contingencies

    

Stockholders’ deficit:

    

Class A and Class B common stock

     12       12  

Additional paid-in capital

     9,356       10,661  

Accumulated deficit

     (31,742     (25,172
  

 

 

   

 

 

 

Total stockholders’ deficit

     (22,374     (14,499
  

 

 

   

 

 

 

Total liabilities, redeemable convertible preferred stock and stockholders’ deficit

   $ 69,973     $ 72,550  
  

 

 

   

 

 

 


CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND

COMPREHENSIVE INCOME

(In Thousands, Except Share and per Share Amounts)

(Unaudited)

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
     2016     2017     2016     2017  

Revenue

   $ 38,603     $ 41,338     $ 113,373     $ 120,489  

Cost of revenue

     21,514       22,571       64,177       66,431  
  

 

 

   

 

 

   

 

 

   

 

 

 

Gross profit

     17,089       18,767       49,196       54,058  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating expenses:

        

Research and development

     2,390       2,771       6,157       7,862  

Sales and marketing

     2,418       3,128       6,876       8,099  

General and administrative

     7,899       9,797       23,571       25,691  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total operating expenses

     12,707       15,696       36,604       41,652  
  

 

 

   

 

 

   

 

 

   

 

 

 

Operating income

     4,382       3,071       12,592       12,406  
  

 

 

   

 

 

   

 

 

   

 

 

 

Other expense, net

     (229     (538     (597     (1,950
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from continuing operations before income taxes

     4,153       2,533       11,995       10,456  

Income tax provision

     (137     (899     (406     (3,886
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from continuing operations

     4,016       1,634       11,589       6,570  

Loss from discontinued operations, net of income taxes

     (728     —         (3,739     —    
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income

   $ 3,288     $ 1,634     $ 7,850     $ 6,570  
  

 

 

   

 

 

   

 

 

   

 

 

 

Total comprehensive income, net of income tax

   $ 3,288     $ 1,634     $ 7,850     $ 6,570  
  

 

 

   

 

 

   

 

 

   

 

 

 

Earnings per share:

        

Income from continuing operations

   $ 4,016     $ 1,634     $ 11,589     $ 6,570  

Less: income allocated to participating securities

     531       213       1,533       858  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from continuing operations attributable to common stockholders

   $ 3,485     $ 1,421     $ 10,056     $ 5,712  
  

 

 

   

 

 

   

 

 

   

 

 

 

Income from continuing operations per share:

        

Basic

   $ 0.30     $ 0.12     $ 0.86     $ 0.48  

Diluted

   $ 0.27     $ 0.11     $ 0.78     $ 0.42  

Net income

   $ 3,288     $ 1,634     $ 7,850     $ 6,570  

Less: income allocated to participating securities

     435       213       1,038       858  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income attributable to common stockholders

   $ 2,853     $ 1,421     $ 6,812     $ 5,712  
  

 

 

   

 

 

   

 

 

   

 

 

 

Net income per share:

        

Basic

   $ 0.25     $ 0.12     $ 0.59     $ 0.48  

Diluted

   $ 0.22     $ 0.11     $ 0.53     $ 0.42  

Weighted average number of common shares outstanding:

        

Basic

     11,600,189       11,828,657       11,643,664       11,814,045  

Diluted

     12,810,379       13,252,737       12,828,894       13,487,649  

The Company recognized total stock-based compensation expense in continuing operations as follows:

 

     Three Months Ended
September 30,
     Nine Months Ended
September 30,
 
     2016      2017      2016      2017  

Cost of revenue

   $ 17      $ 17      $ 45      $ 57  

Research and development

     30        38        108        100  

Sales and marketing

     37        54        142        124  

General and administrative

     161        503        804        821  
  

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 245      $ 612      $ 1,099      $ 1,102  
  

 

 

    

 

 

    

 

 

    

 

 

 


CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(In Thousands)

(Unaudited)

 

     Nine Months Ended
September 30,
 
     2016     2017  

Operating activities

    

Net income

   $ 7,850     $ 6,570  

Loss from discontinued operations, net of income taxes

     3,739       —    

Adjustments to reconcile net income to net cash provided by operating activities:

    

Depreciation and amortization

     4,768       4,272  

Amortization of debt issuance costs

     27       96  

Stock-based compensation

     1,099       1,102  

Change in fair value of shareholders’ anti-dilutive arrangement

     —         689  

Deferred taxes

     253       3,450  

Loss on disposal of property and equipment

     11       55  

Changes in operating assets and liabilities:

    

Accounts receivable

     (3,483     (1,864

Prepaid expenses and other assets

     (1,421     (1,470

Deferred costs

     (671     (3,556

Accounts payable

     1,087       (2,170

Accrued expenses and other liabilities

     (1,598     1,267  

Deferred revenue and advance billings

     1,066       1,405  
  

 

 

   

 

 

 

Net cash provided by operating activities from continuing operations

     12,727       9,846  

Net cash used in operating activities from discontinued operations

     (7,613     —    
  

 

 

   

 

 

 

Net cash provided by operating activities

     5,114       9,846  
  

 

 

   

 

 

 

Investing activities

    

Purchase of property and equipment

     (2,688     (2,323

Capitalized software development costs

     (1,537     (2,586
  

 

 

   

 

 

 

Net cash used in investing activities from continuing operations

     (4,225     (4,909

Net cash used in investing activities from discontinued operations

     (1,005     —    
  

 

 

   

 

 

 

Net cash used in investing activities

     (5,230     (4,909
  

 

 

   

 

 

 

Financing activities

    

Borrowings on line of credit

     40,200       4,000  

Repayments on line of credit

     (45,200     (9,000

Payments on capital leases

     (81     (49

Repayments on term loan

     —         (1,500

Payment of debt issuance costs

     (13     —    

Proceeds from issuances of common stock

     932       174  

Decrease in restricted cash

     38       16  
  

 

 

   

 

 

 

Net cash used in financing activities from continuing operations

     (4,124     (6,359

Net decrease in cash and cash equivalents

     (4,240     (1,422

Cash and cash equivalents, beginning of period

     10,059       6,788  
  

 

 

   

 

 

 

Cash and cash equivalents, end of period

   $ 5,819     $ 5,366  
  

 

 

   

 

 

 

Supplemental disclosure of cash flow information

    

Cash paid during the year for interest

     571       1,346  
  

 

 

   

 

 

 

Cash paid for taxes

   $ 159     $ 691  
  

 

 

   

 

 

 

Supplemental disclosure of noncash financing activities

    

Acquisition of equipment through capital leases

   $ 132     $ —    
  

 

 

   

 

 

 

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
September 30,
    Nine Months Ended
September 30,
 
     2016     2017     2016     2017  
     (In thousands)  

Consolidated Gross Profit

   $ 17,088     $ 18,767     $ 49,196     $ 54,058  

Depreciation

     1,155       1,161       3,513       3,245  

Stock-based compensation

     17       17       45       57  
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP Gross Profit

   $ 18,260     $ 19,945     $ 52,754     $ 57,360  
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP Gross Margin

     47     48     47     48


By Segment

CPaaS

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
     2016     2017     2016     2017  
     (In thousands)  

CPaaS Gross Profit

   $ 12,052     $ 14,150     $ 33,324     $ 40,197  

Depreciation

     1,155       1,161       3,513       3,245  

Stock-based compensation

     17       17       45       57  
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP CPaaS Gross Profit

   $ 13,224     $ 15,328     $ 36,882     $ 43,499  
  

 

 

   

 

 

   

 

 

   

 

 

 

Non-GAAP CPaaS Gross Margin

     44     46     42     45

There are no non-GAAP adjustments to gross profit for the Other segment.

Adjusted EBITDA

 

     Three Months Ended
September 30,
     Nine Months Ended
September 30,
 
     2016      2017      2016      2017  
     (In thousands)  

Income from continuing operations

   $ 4,016      $ 1,634      $ 11,589      $ 6,570  

Income tax benefit

     137        899        406        3,886  

Interest expense, net

     229        402        597        1,261  

Depreciation

     1,325        1,241        4,099        3,643  

Amortization

     222        210        669        629  

Stock-based compensation

     245        612        1,099        1,102  

Loss on disposal of property and equipment

     27        46        11        55  

Change in fair value of shareholders’ anti-dilutive arrangement (1)

     —          136        —          689  
  

 

 

    

 

 

    

 

 

    

 

 

 

Adjusted EBITDA

   $ 6,201      $ 5,180      $ 18,470      $ 17,835  
  

 

 

    

 

 

    

 

 

    

 

 

 

 

(1) Relates to an antidilutive agreement which allows certain principal non-founder shareholders the ability to purchase additional common shares.


Non-GAAP Net Income

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
     2016      2017     2016      2017  
     (in thousands, except share and per share amounts)  

Net income

   $ 3,288      $ 1,634     $ 7,850      $ 6,570  

Stock-based compensation

     245        612       1,099        1,102  

Change in fair value of shareholders’ anti-dilutive arrangement (1)

     —          136       —          689  

Amortization related to acquisitions

     130        130       390        390  

Loss (gain) on disposal of property and equipment

     27        46       11        55  

Estimated tax effects of adjustments (2)

     —          (351     —          (852
  

 

 

    

 

 

   

 

 

    

 

 

 

Non-GAAP net income

   $ 3,690      $ 2,207     $ 9,350      $ 7,954  
  

 

 

    

 

 

   

 

 

    

 

 

 

Non-GAAP net income per share, basic

          

Non-GAAP net income

   $ 3,690      $ 2,207     $ 9,350      $ 7,954  

Non-GAAP weighted average shares used to compute net income per share, basic

     13,375,189        13,603,657       13,418,664        13,589,045  

Non-GAAP net income per share, basic

   $ 0.28      $ 0.16     $ 0.70      $ 0.59  

Non-GAAP net income per share, diluted

          

Non-GAAP net income

   $ 3,690      $ 2,207     $ 9,350      $ 7,954  

Non-GAAP weighted average shares used to compute net income per share, diluted

     14,585,379        15,027,737       14,603,894        15,262,649  

Non-GAAP net income per share, diluted

   $ 0.25      $ 0.15     $ 0.64      $ 0.52  

Reconciliation of non-GAAP weighted average shares outstanding – basic (3)

          

GAAP weighted average shares used to compute net income per share attributable to common stockholders, basic

     11,600,189        11,828,657       11,643,664        11,814,045  

Add back:

          

Additional weighted average shares giving effect to conversion of preferred stock at the beginning of the period

     1,775,000        1,775,000       1,775,000        1,775,000  
  

 

 

    

 

 

   

 

 

    

 

 

 

Non-GAAP weighted average shares used to compute net income per share, basic

     13,375,189        13,603,657       13,418,664        13,589,045  
  

 

 

    

 

 

   

 

 

    

 

 

 

Reconciliation of non-GAAP weighted average shares outstanding – diluted (3)

          

GAAP weighted average shares used to compute net income per share attributable to common stockholders, diluted

     12,810,379        13,252,737       12,828,894        13,487,649  

Add back

          

Additional weighted average shares giving effect to conversion of preferred stock at the beginning of the period

     1,775,000        1,775,000       1,775,000        1,775,000  
  

 

 

    

 

 

   

 

 

    

 

 

 

Non-GAAP weighted average shares used to compute net income per share, diluted

     14,585,379        15,027,737       14,603,894        15,262,649  
  

 

 

    

 

 

   

 

 

    

 

 

 

 

(1) Relates to an anti-dilutive agreement which allows certain principal non-founder shareholders the ability to purchase additional common shares.
(2) The Company had a full valuation allowance on its deferred tax assets until December 31, 2016.
(3) Reflects proforma conversion of preferred stock; in connection with the initial public offering, the conversion of the 1,775,000 convertible preferred shares into shares of common stock occurred in the fourth quarter of 2017.

Free Cash Flow

 

     Three Months Ended
September 30,
    Nine Months Ended
September 30,
 
     2016     2017     2016     2017  
     (In thousands)  

Net cash provided by operating activities from continuing operations

   $ 2,174     $ 4,766     $ 12,727     $ 9,846  

Net cash used in investing activities from continuing operations (1)

     (857     (2,114     (4,225     (4,909
  

 

 

   

 

 

   

 

 

   

 

 

 

Free cash flow

   $ 1,317     $ 2,652     $ 8,502     $ 4,937  
  

 

 

   

 

 

   

 

 

   

 

 

 

 

(1) Represents the acquisition cost of property, equipment and capitalized development costs for software for internal use.

CONTACT: Investor Contact: Seth Potter, ICR, Inc., for Bandwidth, 919-283-5993, ir@bandwidth.com