BAND - Earnings call transcript Q4 2017

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Operator

Greetings and welcome to the Bandwidth Fourth Quarter 2017 Earnings Results Conference Call. [Operator Instructions]. I would now like to turn the conference over to your host, Seth Potter, with Bandwidth Investor Relations. Please go ahead.

Seth Potter

Thank you and good afternoon and welcome to Bandwidth’s fourth quarter 2017 earnings call. the market in closes. discussing issued press be the after we’ll results our announced release Today, Hoffman, of With is Chief Jeff David on Morken, Financial me the Bandwidth’s Executive call Officer Bandwidth. this afternoon Chief Officer and They'll for call open Q&A. prepared begin remarks with then the and

be our guidance full call, may execute for plans plan strategy, quarter XXXX will and the of to and business we statements XXXX, maintain to including the prospects. and and acquire statements related first forward-looking, During our our ability new concerning year our our to other growth make that considered our financial existing regarding statements of customers

of Forward-looking forward-looking views We we statements upcoming. or our undertake subsequent These any with words often as not revise update these identified reflect substitute day. anticipate, and considered be such today as, as to should our or no be we this statements to expect, only statements. obligation may view

subject performance not Forward-looking the promises are are from could to that and actual statements variety our of results cause differ or future of uncertainties materially risks and to expectations. guarantees a

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

website that, after website and GAAP of bandwidth.com non-GAAP SEC’s turn in non-GAAP at today, included during the measures. call Finally, measures today's over me of of issued the on the sec.gov. is we David. located market press to the to course to close release With our which our financial refer let at call, A reconciliation will certain is

David Morken

to thanks us today. call and on Seth joining for the everyone you Thank

and during during We fourth core on call public the our on our serve a focused metrics the which we mission with guidance are provided on the pleased during in execution last to exceeded became we We quarter. expectations company our remained quarter's of all team quarter customers.

a launch excited by about services to new we're enterprise text our businesses. current experiences grow customers CPaaS consumers and in and voiced forward and are XXXX Looking is and year empowering great strong supported for which outlook. ahead

Our we IP seamlessly comprehensive build platform networks software provided integrates one with the communications operate. U.S. the of that and largest in voice

Our within allow capabilities APIs devices. launch scale to and their voice software enterprises migrate and rapidly and applications advanced messaging

platform complete enterprises operating are real integrated offer solutions network only the owning and voice are operating teams customer superior provides and XXX IP experiences our that software communication overall services platform, and dedicated quality that demand. monitoring, complete with We services we time the solutions, by XXX to able

all of during rate successful over year in for Our dollar combination XXX% of valuable unique our retention customers team culture our which and assets, and than dynamic QX. evidenced amazing better growth is the active drove based customers. by execution The offering strength net drive and expected our results XX% year CPaaS

year increase over Specifically CPaaS year $XX.X in a came total at driven in by revenue. million revenue XX%

Now highlight and the key of would to I speak during our plans XXXX. like some accomplishments to for fourth our quarter

able enterprise and one. grade as flexible deliver and an as built to enterprise to day software strong Bandwidth cloud net Expanding to enterprise existing our robust provide services of quarter Board. evidenced the nature our scale are the indicator them deployment launch customer and the are fast, from We are ground customers driven our customers the with expanded the across During well. retention usage our all enterprise average a in improvement up the of result platform increased our we fourth by of as application, is by our platform relationships relationships a from multiple rate APIs

able a ability customers very well is in where of the in in the short the have serve period marketplace. calling share Our the space been time. significant leaders and has vertical win such business we visibility conference example created in to awareness One most to market

longer. in our platform growth our expansion relationships usage of across the durable use over have of sized will our large increase with dynamic that and our businesses our services customers from industries and add both of primary expect be and We time. and These driver the more our commonly medium relationships services with XXXX as various stay other customer's as customer been at us existing

satisfied feedback, enterprise that a will We provide customer additional on rate customers for product continue higher renew and focus We vital referrals business. services, and at relationships new satisfaction. purchase to believe our provide customer our cultivate contracts

our leveraging as our cases communications continued such product evolve. as customer's and to virtual technology succeed intend enterprise in to needs. our meet use platform to to We committed are network assistants features We innovative our of development capabilities support product help customers and to invest new personal

as from In discovery. to follow existing customers and scale to country XXXX rise office scratch. at Alexa Many voice home internationally interface plans to believe We plan an offerings fulfil new our a of have our than we we to rather regard so. as Amazon's Home demand opportunities. example trying of and in existing international will Google the as year operate of do expand For create existing a the customers be will our or such it and in previously our stated

currently our with cost to people to consistent success. growth critical want approach we given we are we durable for principles. outbound our a purpose, mention calling have since business over as culture experienced U.S. quality structural future international outbound I a our would reminder our advantages to an to define if our international committed and and well opportunity importance years. take We here capital currently in together immaterial we the how the services culture has our experience disciplined substantial XX building and limited decide to last corporate in success and to the with our pursue international remain team and to work its a is been inception XP's, international allocation our and we messaging As

is customers purpose our priority. and accomplish for to is our mission top it Our

Second every are company to happily spirit. to a programs our who mission our We policies framework, the and very to to desire from into this strengthen of At strength we as whole people people. person designed our this essential body, through and and grow accomplishing strength heavily invest our season. do are mind our through is heart culture result

with stands to XX% up the piece We approximately employees them. principles months. third are importantly we during we six for and entire more XXX last XXXX we company by define principles, strong Our the which share live across our committed ended

amounts to clear billed. dispute litigation results to matter. Verizon extremely agreement respect Bandwidth. also specifies with wanted prospectively. with Verizon in this February certain settlement We billings I address credits issued the with We're settlement our to path claims Under bill made thrilled the agreement to into agreement resolve $X.X previously of Verizon's Verizon. team. settlement and with Finally Banwidth against also terms forward for Verizon counter outcome a The we resolution a briefly favorable a million have payment and an working a excited to entered Verizon our The to and ongoing lumpsum legal settlement

exciting off fourth quarter our capped Bandwidth. So in strong for year an summary

combination believe and needs serve all API over amazing With IP we to is XXXX me of let in communication to platform, hand our it Bandwidth of the detail. network, to our customers. well the through to Looking to team unique financials that our leverage that positioned Jeff enterprise further walk more

Jeff Hoffman

quarter full quarter detailed a I of will David. our and full provide and and then fourth the XXXX. provide overview year first more for our year financial performance Thanks, XXXX outlook

my and dollar another we which net performance expectations improvement all call in guiding accelerated our to Following based metrics. up retention quarter for Fourth rate growth will strong highlighted in questions. Bandwidth remarks revenue by the resulted open exceeding your across was

enterprises to into and Our ongoing driven their services. solid products continues as performance to voice, continue by messaging be XXX embed and demand

fourth During total XXX million year. CPaaS the accounts expected decline ended fourth up million revenue due over in CPaaS We total year. over down see total XX.X XX to contributed year revenue XX% XXXX quarter from million, Legacy Other in quarter our revenues indirect was revenue active over XX% X.X remaining XX% revenue. up X.X year. the customer revenue Within the with quarter year services and million of continued up year the was fourth

our In XXXX. XXX% a addition, our to retain rate, existing of expand dollar and to ability of customers business based our with gauge fourth a net quarter compared retention XXX% during was the

curtail Our reflects to decision services to net retention our last This dollars CPaaS to a rate. this issue quarter we competitive is dollar retention base never expect impact the provider. fourth our quarter based rate

discussing to on I I going metrics like forward. that Before be out profitability to moving point non-GAAP results will would

GAAP and between earnings the GAAP be financial results in results along Our found release. our full reconciliation with non-GAAP can

fourth December average our outstanding loss million net of Fourth on in continuing for and million resulted expenses of which up non-GAAP which related share tax $X.XX excludes was the operating period million XXXX. per margin personnel a of same tax fourth quarter $X.X yielding gross increase XXXX deferred primarily of support X.X attributable last growth. fourth year an depreciation from X.X On XX.X million our the of of the the million common by for onetime compensation XXXX. and compared to a Our weighted to Act adjusted million profit or EBITDA remeasurement in quarter quarter quarter Jobs stockholders was in million costs XX% The reported we a the in XX.X X based in quarter shares fourth charge GAAP due a to basis we reflects from enactment driven the to gross operations the and cuts assets. during XX% XX.X gross achieved XXXX based stock basic margin

fourth on guidance in weighted X.X XX.X breakeven was income million our net based of million high this diluted end non-GAAP was share outstanding, $X.XX. $X.XX shares well Our above the per average to quarter of or

equipment in million During quarter we costs for continuing fourth purchases X.X net as software million. capitalized and X.X generated million development internal well operations from free and of cash in use flow cash property which X.X includes as of the

results quick year. year XXX summary full the was up revenue Within million for Turning revenue to CPaaS XXX.X total year up year XXXX revenue X% a a XX% year. total over million of over was financial

outstanding. XXXX average income XX.X net X.X and shares non-GAAP based million adjusted share XX.X on per weighted diluted or EBITDA million $X.XX was was During million

Bandwidth to December XXXX debt. sheet the XX, cash and million balance of as equivalents cash and XX.X Turning no had of

and fourth facility. company net IPO our its amounts of loan a term discounts which completed used pay million, company of underwriting proceeds portion was which of to reminder on As generated the outstanding during a the commissions XX.X to the quarter down all approximately

some finish with Now regarding I'd like thoughts financial outlook. to our

XX% up full the at the we the range million be of CPaaS year a revenue million XXXX expect XXX terms the to of of or of to midpoint In range. XXX in

We Verizon favorable revenue a to related expect the revenue range of our for to million includes XXXX XXX point be settlement impact We to out the the wanted in total million. other to David that mentioned earlier. XXX that

the revenue would includes other revenue X.X for a the settlement XXXX have declined XXXX. million of excluding full expected Specifically approximately year to onetime as other benefit compared

positive taxes. first We directly of impact year expect flow realized to line to in our to half the of be and bottom the the net

common EPS million range be approximately to outstanding the non-GAAP the shares is assumes of loss XX.X of issued weighted the preferred convertible of This approximately well result stock. a the by company's a As IPO common in stock share. as per into breakeven conversion as includes average of the in shares outlook stock $X.XX expected of the Class shares which A of company

Turning quarter million. of in XX first XXXX guidance we of expect for be to million revenue CPaaS the range to XX.X our to the

range with to XX.X the the to IPO settlement. other revenue outstanding million. expected to to margins of assumes share per our be earnings Verizon exception million, XXXX to to share. the quarter be quarter the diluted $X.XX our shares In consistent results CPaaS million the the per to first slightly XXXX margins the This of average gross of we impact support of is weighted related range anticipate includes proceeds diluted X.X favorable platform $X.XX fourth is in which total of settlement. in overall our and the with growth portion invest extend the XX.X be a Verizon expect lumpsum favorable expected primarily due revenue to expect approximately to XX to of We to be impact outlook Non-GAAP million of to

accelerate to So an which year in growth. Bandwidth was summary XXXX positioned exciting has

will products We and that operator call. now business believe hand marketplace a and continue have opportunity growing their build the to large to With I services. voice, messaging portion and of the we back to address the as continue very a into the to we Q&A the enterprises embed large for XXX and call

Operator

Instructions]. [Operator

with the Stanley. from comes Please question Morgan your Marshall Meta with first proceed question. of line Our

Meta Marshall

initial to a if hiring those kind customers and of wanted of customers then I the second of a I cases of know kind that or sales what some if have you get good how finding use are initiatives making you that talk and you're some could some just about them kind with where the number to new of tracking now larger question kind you are Thanks. of expected kind sense of guys started could just most is of those to have you of gained success perform? with common how

David Morken

devices. our throughout that the with that the and There's applications being engaging products enterprises top and and use no cases quarter To quarter and by within we're answer most seeing through and the mind question. novel enterprise question voice preceding I our even in part a and company customers promotes hypothesis our been that are messaging new the of of services. fourth is the CPaaS consistent year your enterprise, value proposition on that’s of surprised adoption embraced the trend recent as join forgot case are good second your customers experience the by it's use we

Meta Marshall

customers of kind the and large they're expectations? on tracking to Just how

David Morken

well. chime Yes, so and I'll ask answer in Jeff then to as

within Our had throughout us those what our busy their support and largest executing the tracking XXXX strategies would customer keep expectations to are to them. consistent we and end describe speed planned set how on they as so of I up those with are

Jeff Hoffman

customers to just so say you going also want from just we quarter Board to to was of the the good strong have had although that. getting good So a at in large fourth the a growing customers general growth base performance we we're mentioned mention our across that's rate that

Meta Marshall

first and then just I Okay, question mean again. to circling the back

mostly use similar you companies should general of just of noted is that know still but we kind make-up could with presence You mobile customers the there assume you kind application new who or in think kind of of of the we cases customers? or are are as how know these

David Morken

platform have is customer Yes the we represent appeal but XXXX doesn't both then enterprise we've historically most particular a the so sales composition other as actively the in set customers that's that what with database of with cohort we the and new approaching as that broad customers targeted our have recent target us a it seen is any XX,XXX Fortune vertical customer concentrate larger really been a force to consistent service in have and and joined does those consistent provide know but we have quarter. of our that enterprise you

Operator

Walravens comes from proceed question line with of next Please JMP Patrick your Our with question. the Securities.

Patrick Walravens

rate in is is question that first net my should about retention think we based trending guess XXX% I terrific. that XXXX?. the dollar How

Jeff Hoffman

as is one sales that a of competitive the last a fourth are away provider is and to demand think with our force see we as can drag into quarter ramp forward XXXX existing overtime see going my of think continue the continue curtailing we customers so forward, we'll forward, trend well range that mentioned we that will had to from to that look at from that up. we I going to and beginning we're should and in is how growth we'll this I the then was that go expect the comments as at quarter in going the think I that sort services things I now

Patrick Walravens

new build you, of going for you going public for that How's Dave reasons to the acquisition engine. the know far? was so then And customer one Terrific.

David Morken

and Pat, our and It feel and well we blast of I one was around good that far did and time and I'll year. XX folks tradition them have new plan absolutely are you're here take a about breakfasts in where this morning right have those doing to know another so hire underway getting a the I of staffing for a at

Patrick Walravens

to on And that out of know was other the you going? how the the is wanted building I platform, place API you that spend big think capabilities

David Morken

platform that a good the also and as well. was it we quarter part that to build fourth that the hiring we've public that's of of use our until the of execute platform and the wasn't was continuing well our offering we point, just against fourth in and is So strategy from with part so the proceeds dear out near very in much quarter our still focus think done it

Operator

of Davis question. comes question Richard your next Please Our with the Canaccord proceed with Genuity. line from

Richard Davis

the to I ties that on location, that that. and introduced couple kind are much I API's do with to more the things have be using called in how to use my have and the own DC be people you and and it it's will of of technical that How savings kind cost then critical question A kind worth some messaging would build second what dynamic side, as you yourself that giving of system product of things extent Thanks. kind differentiation and talent as guess case? like see would

David Morken

standout within is location Emergency for service XXX us. Richard. platform Thanks, a services real our distinctive

seen underlying of capability the States very United on specificity for safety part economics that and point the us and proposition infrastructure is is because owner from expanding of strategy. the our public access and so have value location all new connects service that to that customers the essential. product that We've platform join much to We extending

can't CPaaS a If reach time would infrastructure you to coverage it to that on then value within significant the provide wanted have of undertake to platform. expense but you to money would We've about significant spend spent I to extent to replicate and within it consider integrate the much also time work be the too get but how integrating or platform you terribly that location significant. have specific how so I quite and the would much

Operator

[Operator Instructions].

the Will Baird. W. Robert line Our next Please with proceed Power comes with question from of question. your

Will Power

how on to that to Yes little [indiscernible] any maybe versus just customers usage to it trying at following that dollar a just Maybe your bit that? within with the rate, based much etcetera, API increase color up adding further you see within nice capabilities acceleration. existing new was your new whether that be starting other patterns XXX unpack your those voice of look customer retention as customers

Jeff Hoffman

preponderance the based that say seeing you would but we uptake driven products the the I the the was that usage the mentioned but are by favorable intention lesser dollar rate two in net of be growth that of of impacts. would other

Will Power

frame Okay. And color further front then then with margin to gross Jeff and that the there for maybe guidance as in any upside on to the quarter expect off think I that drivers that for you, at be and the respect 'XX or is QX you level the similar to way right higher to 'XX? the 'XX coming kind level of to what's it

Jeff Hoffman

Sure.

gross that drive continues our a were ability pleased saw to QX and efficiencies and to we benefit there our revenue you in also favorable the front yes with within performance margin really from platform. mix So on expansion margin the our

and be us Going well. throughout will with putting year so going with forward intent serving better than these rather be scale and investments IPO customers going our going our will more as we in growing some the the of expect investment proceeds more forward to we the XXXX increasing margin forward and to are flat of initially help margins doing work enhancement

Will Power

voice in to of any about if early but I know remarks anecdotes are then know you it's referenced know wonder excited trends and I still one you respect traction pretty markets you yet? David there is suspect calling with opportunities system prepared you're early And your voice the you and Okay.

David Morken

and really with you same. us in in AI fundamentals robust anything going and the means tied and excited what but of We're to our invest ease remains drove have offices that the business area user to big homes interface technology use that the know [ph] specific for of thesis data to all doing rec I behind about and share that the overarching voice down to don't forward of

about bullish going very means very, that what still us for we're So forward.

Operator

line the your Our next KeyBanc with of question Markets. from Branson Brent with with Capital Please Bracelin proceed Brant question. comes

Unidentified Analyst

outside of was of if [indiscernible] is sort of delivered This for what through wondering kind offerings? you price can of any on services are maybe kind I the for of maybe Brent. the expanding those or the point be current I if initiatives could potential or on forward are be and delivered a API, horizons SMS putting services higher future ask different higher voice into incorporated service margin that could and of how your

David Morken

but at don't footprint so items in of over new inspiration call built on moments we as current we the paid be that's understand historically something and of customers know what domestic jurisdiction past and our most looking scaling share Today and past. and we've video are not we free the are expanding or new significant XXXX whistle that's but with our or aren't we from improving them year to any on what roadmap network also add do novel but headcount that the for that primarily the time do we the we product being with for is or question have our focused but done hear sales don't the the robustness interest for we focused a offer or service outside enterprise and value it's when you gross the several I margins invested of special have able the discovery revolutionary I we platform platforms we where historically we platform and to years with and that so functionality will breakthrough and and bell constantly our to of have of in us innovating platform our have really in on our international anticipate is a on would

Operator

for we closing have turn question the would answer to like the reached David Morken end and session Ladies I Thank you. remarks. and of gentlemen the to call and back

David Morken

about just us were today a that all note to that We're we as Hector and you, able and thank for excited to to Thank joining the I'd for and call. XXXX you you. on on like joining band. the of Thank Band-mates team you thank our all to achieve everything here everyone and of

Operator

This concludes conference. today's

You may participation. this Thank lines for disconnect time. you your at your

Bandwidth (BAND) 21 Feb 182017 Q4 Earnings call transcript