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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 September 30, 2021
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 October 29, 2021, 23,168,711 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.
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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 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;
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;
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;
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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 (“STIR”) and Signature-based Handling of Asserted Information Using toKENs (“SHAKEN”) (together, “STIR/SHAKEN”) and other robocalling prevention and anti-spam standards and increased costs associated with such compliance;
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;
other risks related to our indebtedness; and
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.
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 December 31,As of September 30,
20202021
Assets
Current assets:
Cash and cash equivalents$72,163 $321,819 
Restricted cash9,274 9,239 
Other investments40,000  
Accounts receivable, net of allowance for doubtful accounts55,243 75,161 
Deferred costs2,411 2,951 
Prepaid expenses and other current assets14,508 22,355 
Total current assets193,599 431,525 
Property, plant and equipment, net51,645 68,267 
Operating right-of-use asset, net19,491 15,612 
Intangible assets, net248,055 220,566 
Deferred costs, non-current3,604 4,262 
Other long-term assets1,975 7,543 
Goodwill372,239 353,151 
Total assets$890,608 $1,100,926 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable$11,665 $15,688 
Accrued expenses and other current liabilities63,065 76,259 
Current portion of deferred revenue6,515 6,362 
Advanced billings5,429 4,797 
Operating lease liability, current5,515 6,015 
Total current liabilities92,189 109,121 
Other liabilities1,707 5,416 
Operating lease liability, net of current portion17,202 12,525 
Deferred revenue, net of current portion6,386 7,383 
Deferred tax liability61,005 57,997 
Convertible senior notes282,196 479,155 
Total liabilities460,685 671,597 
Stockholders’ equity:
Class A and Class B common stock24 25 
Additional paid-in capital451,463 499,738 
Accumulated deficit(49,505)(68,693)
Accumulated other comprehensive income (loss)27,941 (1,741)
Total stockholders’ equity429,923 429,329 
Total liabilities and stockholders’ equity$890,608 $1,100,926 
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 September 30,Nine months ended September 30,
2020202120202021
Revenue$84,758 $130,638 $230,066 $364,775 
Cost of revenue45,527 72,395 123,895 199,782 
Gross profit39,231 58,243 106,171 164,993 
Operating expenses:
Research and development10,232 13,359 29,316 39,509 
Sales and marketing9,001 13,592 27,073 38,168 
General and administrative18,134 30,354 51,070 85,481 
Total operating expenses37,367 57,305 107,459 163,158 
Operating income (loss)1,864 938 (1,288)1,835 
Other expense, net(4,206)(7,567)(8,980)(20,768)
Loss before income taxes(2,342)(6,629)(10,268)(18,933)
Income tax provision(10)(315)(13,783)(255)
Net loss$(2,352)$(6,944)$(24,051)$(19,188)
Net loss per share, basic and diluted$(0.10)$(0.28)$(1.01)$(0.77)
Weighted average number of common shares outstanding, basic and diluted24,175,762 25,114,762 23,905,322 25,075,941 
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 September 30,Nine months ended September 30,
2020202120202021
Net loss$(2,352)$(6,944)$(24,051)$(19,188)
Other comprehensive income (loss)
Foreign currency translation, net of income taxes139 (12,512)20 (29,682)
Other comprehensive income (loss)139 (12,512)20 (29,682)
Total comprehensive loss$(2,213)$(19,456)$(24,031)$(48,870)

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, 201918,584,478 $19 4,927,401 $5 $275,553 $41 $(5,528)$270,090 
Issuance of debt conversion option— — — — 104,553 — — 104,553 
Debt conversion option issuance costs, net of tax— — — — (3,731)— — (3,731)
Capped call option purchase price— — — — (43,320)— — (43,320)
Exercises of vested stock options32,059 — — — 244 — — 244 
Vesting of restricted stock units103,824 — — — — — — — 
Equity awards withheld for tax liability(14,411)— — — (1,021)— — (1,021)
Conversion of Class B voting common stock to Class A voting common stock500,250 — (500,250)(1)— — — (1)
Foreign currency translation— — — — — (96)— (96)
Stock based compensation— — — — 2,499 — — 2,499 
Net loss— — — — — — (1,058)(1,058)
Balance at March 31, 202019,206,200 19 4,427,151 4 334,777 (55)(6,586)328,159 
Debt conversion option issuance costs, net of tax— — — — (11)— — (11)
Exercises of vested stock options502,182 1 — — 3,296 — — 3,297 
Vesting of restricted stock units21,871 — — — — — — — 
Equity awards withheld for tax liability(2,133)— — — (272)— — (272)
Conversion of Class B voting common stock to Class A voting common stock827,597 — (827,597)— — — — — 
Foreign currency translation— — — — — (23)— (23)
Stock based compensation— — — — 2,425 — — 2,425 
Net loss— — — — — — (20,641)(20,641)
Balance at June 30, 202020,555,717 20 3,599,554 4 340,215 (78)(27,227)312,934 
Exercises of vested stock options44,848 — — — 386 — — 386 
Vesting of restricted stock units17,948 — — — — — — — 
Equity awards withheld for tax liability(2,002)— — — (350)— — (350)
Conversion of Class B voting common stock to Class A voting common stock606,418 1 (606,418)(1)— — —  
Foreign currency translation— — — — — 139 — 139 
Stock based compensation— — — — 2,382 — — 2,382 
Net loss— — — — — — (2,352)(2,352)
Balance at September 30, 202021,222,929 21 2,993,136 3 342,633 61 (29,579)313,139 
Exercises of vested stock options13,995 — — — 149 — — 149 
Vesting of restricted stock units17,424 — — — — — — — 
Equity awards withheld for tax liability(1,749)— — — (273)— — (273)
Conversion of Class B voting common stock to Class A voting common stock497,011 — (497,011)(1)— — — (1)
Equity consideration for Voxbone acquisition663,394 1 — — 106,379 — — 106,380 
Foreign currency translation— — — — — 27,880 27,880 
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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
Stock based compensation— — — — 2,575 — — 2,575 
Net loss— — — — — — (19,926)(19,926)
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 
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)

Nine months ended September 30,
20202021
Cash flows from operating activities
Net loss$(24,051)$(19,188)
Adjustments to reconcile net loss to net cash provided by operating activities
Depreciation and amortization9,927 27,478 
Right-of-use asset amortization3,522 4,251 
Amortization of debt discount and issuance costs10,916 19,475 
Stock-based compensation7,306 11,592 
Deferred taxes14,254 329 
Loss on disposal of property and equipment263 357 
Changes in operating assets and liabilities:
Accounts receivable, net of allowances(16,218)(20,610)
Prepaid expenses and other assets(2,224)(4,173)
Accounts payable2,905 7,122 
Accrued expenses and other liabilities8,675 1,590 
Operating right-of-use liability(3,944)(4,535)
Net cash provided by operating activities11,331 23,688 
Cash flows from investing activities
Purchase of property and equipment(9,536)(12,552)
Capitalized software development costs(1,846)(3,212)
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 40,000 
Net cash (used in) provided by investing activities(242,162)11,681 
Cash flows from financing activities
Payments on finance leases (161)
Proceeds from issuance of convertible senior notes400,000 250,000 
Purchase of capped call(43,320)(25,500)
Payment of debt issuance costs(11,965)(7,544)
Proceeds from exercises of stock options3,859 886