RALEIGH, N.C., May 2, 2018
/PRNewswire/ -- Bandwidth Inc. (NASDAQ: BAND), a software
company focused on communications for the enterprise, today
announced financial results for the first quarter ended
March 31, 2018.
"The first quarter was an outstanding start to 2018 driven by
robust enterprise demand to embed voice, messaging and 911 into
software applications," stated David
Morken, chief executive officer of Bandwidth. "Our
better-than-expected results were driven by enterprise customers
continuing to grow and innovate with our platform. We believe
that Bandwidth is uniquely positioned to capitalize on our
multi-billion-dollar market opportunity due to the versatility of
our cloud-based software platform coupled with the reliability of
an owned nationwide IP voice network."
First Quarter 2018 Financial Highlights
- Revenue: Total revenue for the first quarter of 2018 was
$53.0 million, up 34% compared to
$39.6 million for the first quarter
of 2017. Within total revenue, CPaaS revenue was $38.9 million, up 23% compared to $31.6 million for the first quarter of 2017.
Other revenue contributed the remaining $14.1 million for the first quarter of 2018, and
included $6.3 million from the
Verizon legal settlement. Other revenue was $8.0 million in the same period last year.
- Gross Profit: Gross profit for the first quarter of 2018
was $27.6 million, compared to
$18.1 million for the first quarter
of 2017. Gross margin for the first quarter of 2018 was 52%,
compared to 46% for the first quarter of 2017. Non-GAAP gross
profit for the first quarter of 2018 was $28.7 million, compared to $19.1 million for the first quarter of 2017.
Non-GAAP gross margin was 54% for the first quarter of 2018,
compared to 48% for the first quarter of 2017. Excluding the legal
settlement, our Non-GAAP gross profit and margin for the first
quarter of 2018 would have been $22.5
and 48%, respectively.
- Net Income: Net income for the first quarter of 2018 was
$6.2 million, or $0.30 per share, based on 20.5 million weighted
average diluted shares outstanding. During the first quarter of
2017, net income attributable to common stockholders was
$2.6 million, or $0.20 per share, based on 13.0 million weighted
average diluted shares outstanding for the first quarter of
2017.
Non-GAAP net income for the first quarter of 2018 was $6.7 million, or $0.33 per share, based on 20.5 million weighted
average diluted shares outstanding. Excluding the legal settlement,
Non-GAAP net income for the first quarter of 2018 would have been
$2.3 million or $0.11 per diluted share. This compares to a
Non-GAAP net income of $3.2 million,
or $0.22 per share, based on 14.7
million weighted average diluted shares outstanding for the first
quarter of 2017.
- Adjusted EBITDA: Adjusted EBITDA was $10.7 million for the first quarter of 2018,
compared to $6.8 million for the
first quarter of 2017.
Additional information regarding the non-GAAP financial measures
discussed in this release, including an explanation of these
measures and how each 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 included below.
First Quarter 2018 Key Metrics
- The number of active CPaaS customers was 1,028 as of
March 31, 2018, an increase of 26%
from 819 as of March 31, 2017.
- The dollar-based net retention rate was 115% during the first
quarter of 2018, compared to 109% during the first quarter of
2017.
Additional information regarding our active CPaaS customers and
dollar-based net retention rate and how each are calculated are
included below.
Financial Outlook
As of May 2, 2018, Bandwidth is providing guidance for its
second quarter and full year 2018 as follows:
- Second Quarter 2018 Guidance: CPaaS revenue is expected
to be in the range of $38.5 million
to $39.0 million. Total revenue is
expected to be in the range of $45.1
million to $45.6 million.
Non-GAAP loss per share is expected to be in the range of
($0.11) to ($0.14) per share, using 17.7 million weighted
average basic shares outstanding.
- Full Year 2018 Guidance: CPaaS revenue is expected to be
in the range of $159.0 million to
$160.5 million. Total revenue is
expected to be in the range of $193.1
million to $194.6 million.
Non-GAAP earnings per share ("EPS") is expected to be in the range
of approximately break-even to a loss of ($0.11) per share, using 17.7 million weighted
average basic shares outstanding.
Bandwidth has not reconciled its second 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 first quarter ended March 31, 2018. 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
May 16, 2018, by dialing (844)
512-2921 for the U.S. or Canada,
or (412) 317-6671 for international callers, and entering passcode
13678214.
About Bandwidth Inc.
Bandwidth (NASDAQ: BAND) is a software company focused on
communications for the enterprise. Companies like Google,
Microsoft, 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
second quarter 2018 and full-year 2018, 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 income as net income adjusted for certain
items affecting period to period comparability. Non-GAAP net income
excludes stock-based compensation, amortization of acquired
intangible assets related to the Dash acquisition, impairment
charges of intangibles assets, loss (gain) on disposal of property
and equipment, estimated tax impact of above adjustments.
We define adjusted EBITDA as net income 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,
and loss (gain) from disposal of property and equipment. We have
presented Adjusted EBITDA because it is a key measure used by our
management and board of directors to understand and evaluate our
core 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 net cash provided by or used in
operating activities less net cash used in investments of property,
plant and equipment activities and capitalized development costs
for software for internal use. We believe free cash flow is a
useful indicator of liquidity and provides information to
management and investors about the amount of cash generated from
our core operations that can be used for investing in our business.
Free cash flow has certain limitations in that it does not
represent the total increase or decrease in the cash balance for
the period, it does not take into consideration investment in
long-term securities, nor does it represent the residual cash flows
available for discretionary expenditures. Therefore, it is
important to evaluate free cash flow along with our condensed
consolidated statements of cash flows.
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 STATEMENTS OF OPERATIONS AND
COMPREHENSIVE INCOME
(In Thousands, Except Share and per Share Amounts)
(unaudited)
|
|
|
Three Months Ended
March 31,
|
|
2017
|
|
2018
|
Revenue
|
$
|
39,625
|
|
|
$
|
53,012
|
|
Cost of
revenue
|
21,566
|
|
|
25,364
|
|
Gross
profit
|
18,059
|
|
|
27,648
|
|
Operating
expenses:
|
|
|
|
Research and
development
|
2,682
|
|
|
3,781
|
|
Sales and
marketing
|
2,558
|
|
|
4,522
|
|
General and
administrative
|
7,637
|
|
|
10,569
|
|
Total operating
expenses
|
12,877
|
|
|
18,872
|
|
|
|
|
|
Operating
income
|
5,182
|
|
|
8,776
|
|
Other (expense)
income, net
|
(421)
|
|
|
49
|
|
Income before income
taxes
|
4,761
|
|
|
8,825
|
|
Income tax
provision
|
(1,772)
|
|
|
(2,634)
|
|
Net income
|
$
|
2,989
|
|
|
$
|
6,191
|
|
Other comprehensive
loss:
|
|
|
|
Change in unrealized
net loss on marketable securities, net of income tax benefit of $0
and $2, respectively
|
$
|
—
|
|
|
$
|
(6)
|
|
Total comprehensive
income
|
$
|
2,989
|
|
|
$
|
6,185
|
|
|
|
|
|
Earnings per
share:
|
|
|
|
Net income
|
$
|
2,989
|
|
|
$
|
6,191
|
|
Less: net income
allocated to participating securities
|
391
|
|
|
—
|
|
Net income
attributable to common stockholders
|
$
|
2,598
|
|
|
$
|
6,191
|
|
|
|
|
|
Net income per
share:
|
|
|
|
Basic
|
$
|
0.22
|
|
|
$
|
0.35
|
|
Diluted
|
$
|
0.20
|
|
|
$
|
0.30
|
|
|
|
|
|
Weighted average
number of common shares outstanding:
|
|
|
|
Basic
|
11,798,565
|
|
|
17,658,611
|
|
Diluted
|
12,972,609
|
|
|
20,484,753
|
|
CONDENSED
CONSOLIDATED BALANCE SHEETS
(In Thousands)
(unaudited)
|
|
|
December 31,
2017
|
|
March 31,
2018
|
Assets
|
|
|
|
Current
assets:
|
|
|
|
Cash and cash
equivalents
|
$
|
37,627
|
|
|
$
|
38,773
|
|
Marketable
securities
|
—
|
|
|
8,492
|
|
Accounts receivable,
net of allowance for doubtful accounts
|
21,225
|
|
|
24,404
|
|
Prepaid expenses and
other current assets
|
6,400
|
|
|
6,953
|
|
Total current
assets
|
65,252
|
|
|
78,622
|
|
Property and
equipment, net
|
14,946
|
|
|
15,902
|
|
Intangible assets,
net
|
7,643
|
|
|
7,478
|
|
Deferred costs,
non-current
|
2,068
|
|
|
1,933
|
|
Other long-term
assets
|
1,192
|
|
|
1,047
|
|
Goodwill
|
6,867
|
|
|
6,867
|
|
Deferred tax
asset
|
6,526
|
|
|
3,915
|
|
Total
assets
|
$
|
104,494
|
|
|
$
|
115,764
|
|
Liabilities and
stockholders' equity
|
|
|
|
Current
liabilities:
|
|
|
|
Accounts
payable
|
$
|
3,025
|
|
|
$
|
3,154
|
|
Accrued expenses and
other current liabilities
|
15,633
|
|
|
14,471
|
|
Current portion of
deferred revenue and advanced billings
|
5,768
|
|
|
7,080
|
|
Current portion of
long-term debt and capital lease obligations
|
92
|
|
|
67
|
|
Total current
liabilities
|
24,518
|
|
|
24,772
|
|
Other
liabilities
|
716
|
|
|
704
|
|
Deferred revenue, net
of current portion
|
2,549
|
|
|
7,113
|
|
Total
liabilities
|
27,783
|
|
|
32,589
|
|
Stockholders'
equity:
|
|
|
|
Class A and Class B
common stock
|
17
|
|
|
18
|
|
Additional paid-in
capital
|
102,465
|
|
|
102,743
|
|
Accumulated
deficit
|
(25,771)
|
|
|
(19,580)
|
|
Accumulated other
comprehensive loss
|
—
|
|
|
(6)
|
|
Total stockholders'
equity
|
76,711
|
|
|
83,175
|
|
Total liabilities and
stockholders' equity
|
$
|
104,494
|
|
|
$
|
115,764
|
|
CONDENSED
CONSOLIDATED STATEMENTS OF CASH FLOWS
(In
Thousands)
(unaudited)
|
|
|
Three Months
Ended
March 31,
|
|
2017
|
|
2018
|
Operating
activities
|
|
|
|
Net income
|
$
|
2,989
|
|
|
$
|
6,191
|
|
Adjustments to
reconcile net income to net cash (used in) provided by
operating
activities:
|
|
|
|
Depreciation and
amortization
|
1,376
|
|
|
1,387
|
|
Accretion of bond
discount
|
—
|
|
|
(6)
|
|
Amortization of debt
issuance costs
|
32
|
|
|
16
|
|
Stock-based
compensation
|
246
|
|
|
493
|
|
Deferred
taxes
|
1,562
|
|
|
2,611
|
|
Loss on disposal of
property and equipment
|
9
|
|
|
9
|
|
Changes in operating
assets and liabilities:
|
|
|
|
Accounts
receivable
|
(166)
|
|
|
(3,179)
|
|
Prepaid expenses and
other assets
|
(1,232)
|
|
|
(471)
|
|
Deferred
costs
|
(401)
|
|
|
146
|
|
Accounts
payable
|
(1,663)
|
|
|
(656)
|
|
Accrued expenses and
other liabilities
|
(3,943)
|
|
|
(1,174)
|
|
Deferred revenue and
advanced billings
|
222
|
|
|
5,876
|
|
Net cash (used in)
provided by operating activities
|
(969)
|
|
|
11,243
|
|
Investing
activities
|
|
|
|
Purchase of property
and equipment
|
(130)
|
|
|
(961)
|
|
Capitalized software
development costs
|
(677)
|
|
|
(441)
|
|
Purchase of
marketable securities
|
—
|
|
|
(8,498)
|
|
Net cash used in
investing activities
|
(807)
|
|
|
(9,900)
|
|
Financing
activities
|
|
|
|
Borrowings on line of
credit
|
4,000
|
|
|
—
|
|
Repayments on line of
credit
|
(3,000)
|
|
|
—
|
|
Payments on capital
leases
|
(15)
|
|
|
(25)
|
|
Repayments on term
loan
|
(500)
|
|
|
—
|
|
Payment of costs
related to the initial public offering
|
—
|
|
|
(285)
|
|
Proceeds from
issuances of common stock
|
—
|
|
|
70
|
|
Proceeds from sale of
fixed assets
|
3
|
|
|
—
|
|
Net cash provided by
(used in) financing activities
|
488
|
|
|
(240)
|
|
Net (decrease)
increase in cash, cash equivalents, and restricted cash
|
(1,288)
|
|
|
1,103
|
|
Cash, cash
equivalents, and restricted cash, beginning of period
|
7,028
|
|
|
37,870
|
|
Cash, cash
equivalents, and restricted cash, end of period
|
$
|
5,740
|
|
|
$
|
38,973
|
|
Supplemental
disclosure of cash flow information
|
|
|
|
Cash paid during the
year for interest
|
$
|
549
|
|
|
$
|
19
|
|
Cash (refunded) paid
for taxes
|
$
|
(33)
|
|
|
$
|
90
|
|
Supplemental
disclosure of noncash financing activities
|
|
|
|
Purchase of property
and equipment, accrued but not paid
|
$
|
247
|
|
|
$
|
785
|
|
Unrealized loss on
marketable securities, accrued but not realized
|
$
|
—
|
|
|
$
|
6
|
|
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
March 31,
|
|
2017
|
|
2018
|
|
(In
thousands)
|
Consolidated Gross
Profit
|
$
|
18,059
|
|
|
$
|
27,648
|
|
Depreciation
|
1,047
|
|
|
1,064
|
|
Stock-based
compensation
|
20
|
|
|
18
|
|
Non-GAAP Gross
Profit
|
$
|
19,126
|
|
|
$
|
28,730
|
|
Non-GAAP Gross
Margin %
|
48%
|
|
|
54%
|
|
|
|
By
Segment
|
|
CPaaS
|
|
Three Months
Ended
March 31,
|
|
2017
|
|
2018
|
|
(In
thousands)
|
CPaaS Gross
Profit
|
$
|
13,419
|
|
|
$
|
16,992
|
|
Depreciation
|
1,047
|
|
|
1,064
|
|
Stock-based
compensation
|
20
|
|
|
18
|
|
Non-GAAP Gross
Profit
|
$
|
14,486
|
|
|
$
|
18,074
|
|
Non-GAAP Gross
CPaaS Margin %
|
46%
|
|
|
46%
|
|
|
There are no non-GAAP
adjustments to gross profit for the Other segment.
|
|
|
Adjusted
EBITDA
|
|
Three Months
Ended
March 31,
|
|
2017
|
|
2018
|
|
(In
thousands)
|
Net
income
|
$
|
2,989
|
|
|
$
|
6,191
|
|
Income tax
provision
|
1,772
|
|
|
2,634
|
|
Interest expense,
net
|
421
|
|
|
(49)
|
|
Depreciation
|
1,166
|
|
|
1,222
|
|
Amortization
|
210
|
|
|
165
|
|
Stock-based
compensation
|
246
|
|
|
493
|
|
Loss on disposal of
property and equipment
|
9
|
|
|
9
|
|
Adjusted
EBITDA
|
$
|
6,813
|
|
|
$
|
10,665
|
|
Reconciliation of
Non-GAAP Financial Measures
(In Thousands, Except Share and per Share Amounts)
(Unaudited)
|
|
Non-GAAP Net
Income
|
|
|
Three Months
Ended
March 31,
|
|
2017
|
|
2018
|
|
(In
thousands)
|
Net
income
|
$
|
2,989
|
|
|
$
|
6,191
|
|
Stock-based
compensation
|
246
|
|
|
493
|
|
Amortization related
to acquisitions
|
130
|
|
|
130
|
|
Loss on disposal of
property and equipment
|
9
|
|
|
9
|
|
Estimated tax effects
of adjustments
|
(146)
|
|
|
(160)
|
|
Non-GAAP net
income
|
$
|
3,228
|
|
|
$
|
6,663
|
|
|
|
|
|
Non-GAAP net
income per Non-GAAP share
|
|
|
|
Basic
|
$
|
0.24
|
|
|
$
|
0.38
|
|
Diluted
|
$
|
0.22
|
|
|
$
|
0.33
|
|
|
|
|
|
Non-GAAP Weighted
Average Number of Shares outstanding
|
|
|
|
Basic
|
11,798,565
|
|
|
17,658,611
|
|
Series A redeemable
convertible preferred stock outstanding
|
1,775,000
|
|
|
—
|
|
Non-GAAP
Basic Shares
|
13,573,565
|
|
|
17,658,611
|
|
|
|
|
|
Diluted
|
12,972,609
|
|
|
20,484,753
|
|
Series A redeemable
convertible preferred stock outstanding
|
1,775,000
|
|
|
—
|
|
Non-GAAP Diluted
Shares
|
14,747,609
|
|
|
20,484,753
|
|
|
|
Free Cash
Flow
|
|
|
Three Months
Ended
March 31,
|
|
2017
|
|
2018
|
|
(In
thousands)
|
Net cash (used in)
provided by operating activities
|
$
|
(969)
|
|
|
$
|
11,243
|
|
Net cash used in
investing in capital assets (1)
|
(807)
|
|
|
(1,402)
|
|
Free cash
flow
|
$
|
(1,776)
|
|
|
$
|
9,841
|
|
____________________
|
(1)
Represents the acquisition cost of property, equipment and
capitalized development costs for software for internal
use.
|
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SOURCE Bandwidth Inc.