Bandwidth (BAND) 7 May 242024 Q1 Earnings call transcript

Good day, and welcome to the Bandwidth Inc.

First Quarter 2024 Earnings Conference Call. [Operator Instructions] Please note this event is being recorded.

And now I would like to turn the conference over to Sarah Walas, Vice President of Investor Relations. Please go ahead.

you. Thank welcome Quarter and Earnings Bandwidth's to morning, XXXX First Call. Good in discuss release the we'll our results Today, morning. announced press this issued earlier press CEO; the earnings can The call this investors.bandwidth.com. With an historical David the Raiford, and highlights Morken, our is financial our me presentation on be Daryl Relations Investor with on morning page and at found release CFO. for begin we will the call then prepared open and Q&A. remarks, with They will up

any be considered During the outcomes quarter or as our we may and our may on update uncertainties plans the that they may XXXX. involve of statements. Any cause forward-looking as in reflect call, or and obligation business financial not our actual reliance statements will on and from you forward-looking results implied put to the of expressed second future including results to related this forward-looking, risks by analysis guidance statements today, we materially make to year We made the and concerning forward-looking slides caution statements call these them. undue statements no that presentation or for have to full vary

the section those XX-K our our SEC For material that in affect other website refer of bandwidth.com of risks which sec.gov. actual SEC's all on filings, filing at the latest contained to Relations results, website on important a could our Investor as updated please other factors and of discussion by and available are at

well call earnings are release our issued at reconciliation let refer in press is GAAP today investors.bandwidth.com. With measures certain David. the on During over as to included turn of the non-GAAP financial we course of located as measures. presentation, A call, me to website today's the to will our that, which in earlier non-GAAP

first EBITDA guidance quarter. XXXX and a adjusted Quarter had highest our Thank exceeding quarter ever impressive first the Call. First We Sarah. Welcome to result record an with quarterly start Bandwidth's to Earnings for year, you, revenue

the morning, and for trust full for our customer team first support quarterly God for rest encouraging the given extra I the updated outlook recent seeing very XXXX, walk opportunities I've to year to top us perspective for use asked and then category, capital call Daryl we we Given the customers who where our our with BAND achievements. our results broader the every us. This are direct-to-enterprise, the through and our provide overperformance, go along our fast-growing in The on and lines. I'll them, Daryl? grateful outlook highlighting bottom to a structure mile thank he's our progress. place are mates raising is day of

off structure. David, solid a and good capital in for and We're XXXX, first dramatically quarter, outlook morning, strengthening feeding you, our raising Thank our to guidance year full everyone. start the

control. guidance grew million grew $XXX of revenue the midpoint of Adjusted revenue beat reflecting year-over-year, and good quarter $X First exceeding year-over-year. million XX% top $X million, $XX million. result, up guidance exceeding the XX% XXX% by Within was that cost by year-over-year line our of midpoint of the Communications Cloud EBITDA

an in another XXXX, additional to exercise we accretive initial the Yesterday, XXXX We're their leverage moment partners. a repurchase growth, of face gain. our these million million from convertible certain proud noteholders $XXX and $XXX judicial maturity million XXXX, balance an just exercise. will facility by discount we XXXX of principal that repurchased convertible in into like led profit of Fargo issued revolving $XXX from of discount America to Bank with repurchased very March third million. of eliminated banking million ago, a by our structure yield available early by our recognizing This notes roughly we X-year established repurchase of strengthened notes days and with agreements take now reducing a and value. through amount these our few reduced notes Wells And to structure our our existing a at million facility a November have at structure. undrawn of subject our $XX outstanding amount the strategy. a last to capital term. we repurchase to million. I'd estimate Just about credit the In gain. be deliver capital these This at notes We yesterday's to yesterday's capital improves with balance and then expanding new large entered revolver $XX repurchase to previous flexibility talk a We the essentially $XX with be recognizing $XXX gain doubling August our from discount,

XX% results, communications forward, result, now are million before last year. access us of while us on-hand XX%. potential well balances, cash as standpoint, cash cloud securities up our driver, grew Going generating profitably. messaging Rounding first a commercial I liquidity that revolver XX% to the undrawn and year-over-year our and messaging flow very seize reaching revenue. Within to our our $XXX product and our market quarter to in from of resulting a noted, communications positions opportunities out messaging revenue was XX% continued strong business cloud be From growing that growing

usage in cyclical primary customers, messaging earlier did we usage revenue than million campaign primary cohort estimate the quarter. it demand derived political $X commercial attributed the While from contributed differentiate spend. we the engagement campaigns elections of to from political political first ongoing that expected appear is Customer approximately same from had to from the difficult civic campaign-related presidential U.S.

our to Turning categories. market X

improvement X% year's an revenue plans usage reflecting communications year-over-year as global quarter trends. last from we expected was growth First

execution and direct-to-enterprise our grew well the customers by $X political grew from driven in our ability global from health year-over-year, healthy of continued complex we XX% go-to-market of category financial reflecting customer care reflecting revenue the for Bandwidth's strategy. the programmable tailwind to cyclical challenges continued category, year-over-year, campaign messaging messaging. In strong demand enterprise million solve commercial communications enterprises and XX% as services mentioned demand previously Our services the e-commerce, as

Our of geographies. across remains opportunities full pipeline verticals new and

quarter In points percentage from our rate improvement retention the of operating first metrics, X terms quarter of fourth was of XXXX. an net XXX%,

once customer retention our cloud on continuous Our communications Evidence again and with the of of unwavering XX%. customer reliability paired remained success global in focus innovation. name of and our excess breadth rate

average annual to customer climbed per Our large revenue on reflecting a $XXX,XXX, focus serving record and attracting continued our enterprises.

gross the quarter-to-quarter. small quarter. company. Our gross gross for for year's was that non-GAAP And result really XX% the the it's margin margin prior worth basis points is XXX amount fluctuate quarter, from first great a This a reminding can margin up

XXX provided expectations. year margin with line previously basis expect to continue gross XXXX our in our We full points grow to roughly

than beat million free a cash million free working reflects capital. We flow quarter result track flow draws through guidance achieve use $XX XXXX, full of quarter in seasonal first the The timing cash to closer on first bottom to to of which $X top due margin target. lines. our free XX% year cash us greater pass cash to remain flow and raising our We're on medium-term

adjusted million also full expect the million reflecting raise and be revenue reflecting and the the XXXX, raise. guidance, midpoint million at our $XXX be of to we at now to the For to previous year range, midpoint, $XX a EBITDA beat our $XX

guidance means, campaign XXXX full political as by contribution to year of customers. campaign timing raise this outlook has $XX year is million a customers continues our our project at associated revenue for political point, the campaign messaging commercial while somewhat to our opposed from driven surcharges. That Importantly, accelerated, full and our

pleased of customers, quarters targets. plans delivering. of both bottom expect third capital the conversations and predict. grow revenue the recent the to excitement ramping and on balance the terms reflect you guidance a the the give medium-term and We're These high. year, election relative difficult are quarter X in we're X Based remains us near-term November. In political campaign in business across lull to sheet in to fourth quarter and our in flexibility. we closing, with our achievements able structure our and campaign In our full years to and raise messages peaking while concluding our lines XXXX ago, capital with told political and sequencing while in remaining our comfort that quarter top our structure activity about results of we with on year achieving it's second improving the our profitably, discern we

to back to call Now the I'd David. turn like

their and by is software It tell Global growth to award-winning XX% is platform and they of brought customer the you, a Daryl. to at this rich provides enterprises that enterprise are to the These are Enterprise partners, to XXXX year global complexity and Maestro new past competitive. prospects enterprise in show up aligned time. value what portfolio provides. Global technologies challenges. A we category growth route to know of customers, smooth debt AI the leverage the At driven solves of that month implementations deliver way complexity and quarter number over is dealing automation, communications XXXX have customers and our relevant over the and with ago and need to choice Interoperability, following from enormous strength new solutions little first we same innovations the investors. to central staying opportunity and market our key experiences of us XXXX tech organizations are a their a and legacy Thank cloud. Maestro of employee cloud the with fastest revenue Connect, of moving the have strategy. that time, met that that in it's built conversations most: freedom a The with communications XX% year-over-year direct-to-enterprise offerings with these our

won announced client with Formally it excitement. Maestro Best was and industry Enterprise Connect, Show, welcomed last where of at year's quickly significant

the enterprises As and to suggests, facilitate apps deploy software customers contact real-time the integration complementing cloud is seamless voice orchestration best-in-class capability across an of unified offerings cloud communications, for communications centers AI Maestro platforms. our and manage name to platform,

employee faster to and costs finding increasing of These verticals. experience customers Maestro a the of contact Global while communications Our time control value employee the reduce dramatically cloud of to to are range enterprises better a and optimizing cloud. the moving industry wide can capabilities center and achieve customer across XXXX enable in complexity and

unlock Maestro Bandwidth to example, Genesys, both communications costs as And established for global both fraud partner view FiveX management. best-in-class fintechs and financial They and landscape. Teams, them a cloud-first foundational regulated with while of and and giants more competitive expertise can For cloud highly the vendor lowering serves with navigate help they AI to services, power a the and looking simplifying for as in simultaneously along element modernize. tools vendor-agnostic mature

and complex Maestro want customer and example, experience to new a system retail independent global add another customer a applications As of have may in verticals, the AI. franchises hospitality and

build the customer experience with unified can Now a deliver in to their Maestro, everywhere locations once they integrating all world.

cloud-based new Some enterprises use and managed to integrators system providers their to choosing map build communications. service are and

the channel with growing these enterprise strategy Our transformations. creates partnerships players largest doing

as its communication to part cloud-based enable a and For project replaced like to be messaging domestic Bandwidth software time a API customer flawless examples service worked legacy leading interoperability NWN text with performance The transform holiday automation, with experience platform also to a completed example, to new the as airline. In recently well communications. customers' of integrate deployments. multichannel real short send customers and the in pleased and largest as differentiator valuable customer of their a we high-capacity NWN service telecom for AI Bandwidth call carrier are rolling in cloud these, Carousel, power customer during Its managed provider our Maestro U.S. all the airline's airline frame the employee communications peak is a report addition leader enablement text strategy. We platforms. Bandwidth's season. communications out uniquely easily center capabilities to to enterprise its and distinguished representatives as can to

true come and harder As identify to we're analytics our they competitors a Congratulations help this by less offering. This includes it legendary award At solve incidents believe for enhanced them everyone new talk time customer innovation. to made when customer Stevie Bandwidth. was operations our get the advantage our largest predictive it a many it and a differentiator investing enterprises before potential to to us service Gold significant month complexity, a navigate person, much support, with escalate. to We our AI help, last to in support we have and customer of a also is for team this to real on are remains honored competitive for distinguished achievement.

the earlier At services very other fast-growing election saw industry. This U.S. such in messaging again, from contract just transitioned the our progress digital political So wins with as same of enterprise. performing in are categories programmable Meanwhile, the automotive our related messaging messaging our we very as premier category provider expected a in than encouraging also demand well, base to in expanding you season. solution. X our time, Bandwidth's to customer heard we to Daryl. business, toll-free direct market In vehicle presentation are notable consistently customer commercial now

and Our specialized expanding deep well evolving the the messaging were additions. global existing navigate with from customers In instrumental their category, wallet of and deliverability customer communications. as expertise plans intricate landscape in share support benefit as helping significantly them our we new enhancing communication

For processes. example, provider and traffic, in for in payment customer reliability a as support, Bandwidth the porting solutions and leader valuing number exceptional provisioning care engagement our and health sole voice network their automated QX, inbound selected

and leader later smooth pursue results. time to until little a important were we year is scale opportunities. Before operating excellent Anthony us our process, and today. want over years day-to-day and with new to growth Anthony and He strong Bandwidth's global radically we Officer, evolution, wrap global evident we've friend. Bartolo a wishing leadership all brought mates join us to a in ago and this up, rigor leadership him fortunate in on and have Maestro much fortunate to a leading are a outstanding quarter discipline. We best company Anthony will change a to entire our executed X I a company in thanking expanding our I worldwide He the The marked cloud world-class joined announced our transition. I'm improved and our to disciplined operating for elements know count service partnerships, the customer worldwide our growth, in will our platform, have customer remark Operating pivotal his and stay we accomplishments I in team Chief segmentation, our better following to our communications as reiterate that to solid made leaving that's you'll on him Bartolo, ensure winds result. always He are at point. his is revolution. as a in achievements other product and the our confident with we're strategic overhauled clearly planning excellence. strategic commitment to as seas the closing, advancements innovation reflect lead on see unwavering I the someday all him by him future, excellent in want to Anthony soon, family. In award-winning leadership our mission fair BAND a with me and all

core to and over from call. I opportunities Our question-and-answer the the we operator that this of ahead. I'll leverage team principles has demonstrated and ability operating as quarter to space. lie to deliver proud growth, the a of flow even generation what our turn accomplished leader together in incredibly you. am the have excited about call of I'm our the operating now franchise our of begin more portion the a cash on foundation profitable durable Thank

time, we'll from this with Barclays. Ryan And MacWilliams start from [Operator at Instructions] a question

to Anthony to the did I on expression, he's he Bandwidth moving say Bartolo high improve to use business. a lot moving while know glad want sad And a on, a to note. I I'm on, see that I'm

So helping like retention metrics? from saw and your standpoint? average Maestro annual for support better looks upsells XQ are net David, how customer customers stronger like And feeling these spend. a improving macro Are

want for which see and a the said on reiterate and sorry left XX quarters so master to are very so, just he at flawlessly. I And -- us executed Ryan. has Indeed, we is high us Anthony, the him during outset. leaving And is Thanks, grateful go note. what and to a you conductor

mentioning for that. thanks So

according sentiment top up we we customer across to events. and all factor to all with that consistently outlooks macro customers quarter. the all we segments plans in their live and of Notwithstanding, days policy in the first guide of concerns our base. guide always that bottom, the the into increased terms in macro, segments and these overarching do about that pick we the from international talked In on and our our said, are the and we and results about But that there

we're executing So this rest excited throughout of the year. about

for Perfect. are How little debt after commercial the compared you top year And continued guide raise strength you full bottom line? here a business? the pay through about more in in there. a glad see commentary mostly the Just detail then to Is seeing the that you're the to just Daryl, this line thinking messaging down. stronger your you pass around

revenue. guidance communications is X/X commercial revenue we million $XX the to is X/X at and to surcharges raised X Ryan, that cloud our related Yes. midpoints. by related Roughly of

through represents year falling the EBITDA increase -- And account. approximate to so in in the increase roughly raise X/X is -- margin the at that is the the full

Meta comes Morgan Our next question Marshall from from Stanley.

And customers from way you of of I of capital any the that the little quick end. questions recent number as of new got one, there follow-up, then as over a trends on I picked on a getting bit we platform Maestro, is either past are run Should that You've investment track or guess, kind a quarters. guys for guess thing? looks the sort just like it two up Jamie Meta. look we rate? of couple has at progress with the my sort can

haven't your really, Yes. Maestro customers August going days availability since Thanks early well. these has while really percentage-wise on specific and in the adoption growth question. general substantial. called numbers been for in we our Enterprise continues back out And customers,

grow it that or about in talked is to past and same the rate faster. that growth, So we've actually at continuing

adoption Maestro continues decided out as KPI, additions to we're to particular really a adoption Maestro enterprise haven't call we favorable. and be So customer going but if

to please nice it's with speak Jamie, you, -- Meta. give the regards and to our On

in expenditures incurred quarter quarter, year the first of part or On the versus the the we the traditionally, of more for first first part last capital have the year. the

we at I zeal be of getting I considering. CapEx, year first in the that the the quarter. it's what part phenomenon. of on and don't business Everyone and amount higher our should said, comes when think with -- revenue a guidance the X% plans. zest investment anything natural to around that's and With has you first all we it for hold with are their take slightly

Congrats strong results. on the

comes question next Company. from Our Needham & Ryan from Koontz

growth your that's terms strong strength you was about piece Want to sounds there. broad-based assume ask comms messaging It I that business? really the mostly U.S.-based. like of there, cloud the in on

second First on your relates you it expand Voxbone. and market to gained question. you as international, here, how you thoughts for from And that develops presence Can about forward? going your

growth Thanks strong enterprise for really and solid. the XX% Total up year-over-year messaging is momentum Commercial showed of good question. XX% year-over-year. also

So your a And our recently positive to globally. question is rounds selling and large really about enterprise addition international. which our portfolio. out domestic international, announced solution We offer that's versus part of strong that

the of growth reflect However, messaging the preponderance these do results domestically.

is So strong for international growth forward. us going upside

about solution. your part enterprises now our continue really how a with unsurpassed, business on now very international single coming voice and value The pleased the And expectations, messaging that both continues is we're second messaging our we outperform and of question partner to it to generally it's footprint. real on doing. and expect be business with footprint voice alongside us differentiator globally, international Globally, for to

Got it.

more domestic international sales So to of to international direct strength reach interpret a have given to global sounds and lot win I a has that. maybe an deals little now you're pivot like can planning harder? presence to you It your

Well said.

from comes Our JMP. question from next Citizens Patrick Walravens

Great.

super question this will helpful. going think little Dave, to unusual, I the context but be So a seem is

mean, change. peaked and up $XXX March the just for I X%. last down and positioned XXXX. story And know just you well, been XX% year-to-date over to now? way can in who couple of now step stock years in on understand going you're Last and at at all business this how context, is the people help don't And year, went premarket what's So the almost plus another back the that X%

been from commenting business us from we're what where here. help understand has why and big on, stock just from going not on So the much here? volatility picture the so But here, terms in is headed the there's where headed we're of headed where

for to the you, Thank to Pat. Thanks speak term the opportunity the background. longer and

dissipated when seemed future. in COVID enjoyed as did to after those many era we work ended. So space become And certainly tailwinds our remote the the foreseeable tailwinds COVID

incumbent days our articulated CFO, first and mid- telephony transformation Day is ever since. And years that and it and Anthony X someday ever how to Maestro, and can't to can't Daryl carriers world. and where is software-driven completely the very of but were go executing announce, XXX space be And of there's Raiford, longer-term abandon tipping nothing a excellently like to of and the really this is we've they who came years whole them to but messages going say with hat executed mate, migrating as plans the the business instead Bartolo, the has what I and our be, see Our might plummeted, want peers with last Investor impacted question and matters. of move the soon in my company certainly premise-based, with that to about similarly my our around calls answer I to at a without valuations appropriately cloud wait We early and which space board somewhere. to doing powerful taking this, allow Anthony been on so platforms CEO BAND

vanguard companies are of enterprises that We that. in have do globally helped the these

that has contributed Anthony taken, and the we're basement that an approach crawling last that you way X you an out we're businesses a confidence shot and that the in part spikes with think leadership that communications been over to back the anomaly the I period if that had technology going future. are we team voice at to I'm and and in outperformance that persist time see and now do valuation that longer we've so over I'm built that And a COVID way where text. Daryl would And the of in myself of looking that and look the be and fundamentally again, pattern growth And are to investor, our era macro to has shifts changes the of have it enterprise the durable the horizon. today. and going are years up much back that we've place and and we see a mentioned platform for created then technology bright

is our of this in XXth and communications. So a world. out quarter we do guidance that technology of the continue the real achieving hope put that against pray shift we And we backdrop very to the that to

So I hope that answers the question, Pat.

And our next question comes from Blair. Arjun Bhatia from William

maybe through give the here. Perfect a year that retention that? QX and a progress a uptick noticed the strong, would on that I growth usage great us in strong. figure love we sense net assume Can had with. might embedded to benefit the job quarter there's year to here. retention also of progress enterprise like start net to sounds coming you Maybe is some from It and how back, the retention rate messaging of is nice how some Maestro, first through the but as that just I net might hear QX.

this Arjun, hear Daryl. you. to It's is from nice

to expect that say retention to plainly just me continue Let net we grow.

no we've a Over our existing customer churning inconsequential enterprise more is there larger them net it's very net the outcome. so before We're base is now remove will retention, been happy and when the with with year customers But lower and going. retention, and we quarter when a net in each that customers, replacing rate. year quarter we've formula same each other in with last months, customers, our customers. On spoke reflected. It's that replaced from small retention customer enterprise about XX the quarter, them

growing year, through churn grew expecting rates $XXX,XXX per we're Our to record XX the architected been last average have a months. revenue normal what had have annual the not to would been, be retention net over should will and the customer back we the

just when gross very and year-over-year. sense margin? called for QX basis And That's and you there too look touch seems it year why I is maybe to point especially, QX can Again, the when at improvement performance, as think can't basis much, point gross at you've guess will Perfect. just like be that takes extrapolating wanted I been XXX this than looking be about I other puts I'm Again, there's there. margins. a XXXX. there outperformance improvement one us then out the some I But Okay. it give And on at but XXX performance, we're higher looking on the helpful. I'm

real first quarter as It X quarters touches a that set in really performance. about of is was, I a margin -- we quarterly the the performance. great said, terms It gross record a ago

still basis XXX the year it, last to be certainly points as for said, are We full you expecting We helps. higher over mix product year. --

of our what will to XXX we're and things Is like, We for we're point But driving in we're network also our all now. it Possibly, conservative? as calling the for right as as cost continue for margin together efficiencies, -- calling considering have a costs we're well and for basis it terms which And grows, taking that we investments international improve do. year, well. that's for improvement. our now, the but full

Anthony well. as Hopefully, Understood. again, to congrats right. enough. soon. reconnect we'll Congrats and All Fair

we question Piper Gabrielli a now from Sandler. from have And Quinton

for I'm Sandler. at Piper on Jim Fish here

for Just us. one question

share for you're your just about more change core of it's of about we think kind these material we Is in gaining providing use really cases, As customers? those or seeing similar of cases messaging you're seeing kind specifically Bandwidth, kind should core use historical use in by as messaging, as Or provided it there deployments. in you're strong growth. cases any think

Quinton. broad, It's

broad. is across large have care, We adoption for enterprise, health very, fintech, retail, engagement very the need messaging

our well snail The continue. use incumbent providers from as domestic significant. that e-mail take We we'll that that international share cases expect to are mail displace emerging is but even both competitors some or the conventional and as of

large account. And of enterprise upside so you're there's lots into a once

messaging should we've consider enterprise, the So in had you success broad to which in continue. been has that

we Power Will have And a question from from Baird.

This on Will Power. for is Ioannis Samoilis

that how those So some might versus upside walk some us of QX? in here your And drivers of through the business -- of drivers those just quarter? enterprise last changed could you have or

think I drivers are similar. the

general Our adoption been It hasn't year yet a Maestro availability. since accelerating. is product

We is easily have easy cloud. our enterprises enabling that solution And of not to and to more awareness transition if get our to with AI incumbent. working an the approach you're

voice You've require messaging AI orchestration around of cases lots of your services. got use and that

this that I a pick speed. of the so if to path we've enterprise period, I past driving Bartolo, again, product great sales up adoption got seen quarters didn't results out market. our our to that the And remiss Anthony think the I today. it's leadership. strategy We've call see And in and COO, continues past you think leadership be his during And I'd function and

Okay. then drivers you hoping Awesome. any outlook at some was a growth framework just I of what you expectations guess, call year, messaging. discuss looking could there? of drivers of for the balance for upside maybe messaging the could key Or to I some out? the just the be And there

Messaging in grew in XX% commercial XX% first messaging. quarter, the

robust would in up the $XX that think quarter $X can total second called of in be million, in a second additional would with pick And you our second wedge commercial and the driven the less then in I outlook to the for continued growth be in messaging. commercial $XX campaign. year. the million our expect the definitely projections, would million increased for by similar political messaging messaging have half That of quarter, for

session the today's as well attending very you presentation. And much for this as concludes Thank conference. question-and-answer our

great day. a have and disconnect, now may You