BAND - Earnings call transcript Q2 2019

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Operator

Greetings and welcome to Bandwidth Inc's Second Quarter 2019 Earnings Results Conference Call. At this time all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host Mr. Relations. Investor Griffin, Marc Marc. you, Thank

may begin. You

Marc Griffin

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

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

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

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

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

our website sec.gov. refer non-GAAP website is today's market release the on of SEC's the and press today, the at bandwidth.com call, measures. in which issued at non-GAAP measures we Finally, Reconciliation of is the course of after to on included certain close will GAAP to located financial during our

that, over call David. to me With let turn the

David Morken

Thank I on the everyone you and results that joining earnings quarter lines. top call. very you, both am to expectations quarter bottom thank and report us Marc, on our second to pleased exceeded our second our

quarter Our driving The We in our CPaaS growing produce teams success. have the continue million. in best we investments sales CPaaS the revenue year-over-year. XX% early in $XX.X indicators made quarter and total new of XX% customers revenue achieved year-over-year marketing increased second our active to a of

to deepen a demonstrated opportunity. demonstrate to billion Additionally, continue our results XXX% customers net our dollar the we tremendous existing capture by opportunity base These increased with CPaaS an share as retention rate. market of $XX.X relationships growing

We here are are the to success of stories. the of notable companies serving innovative be most most customer few some a excited

Fortune and are U.S. use its network services provide a the for the customer enterprises services communications terms agreement, multimillion in to solutions expand platform of We to the Under enterprise the and existing offered across voice nationwide Bandwidth collaboration engagement principal to to CPaaS customers. for dollar company pleased and this offers will small CPaaS residential technology that a agreement announce five-year XXX and business

[UCaaS APIs of Bandwidth’s Combining Company’s The supports and enterprise powerful can network company's with digital XXX leverage robust the customers and a applications. they existing now efforts as large customers. adopt the platform voice CPaaS] the the creates API company’s enterprise of combination transformation power grade messaging, that Bandwidth’s cloud-based

and serve. XXXX. of customers Bandwidth large who a complex the quarter the this track in that relationship deeper contribute forward fourth customer be a delivering among to of the has will largest with look record to address solutions our we customers enterprise and beginning Bandwidth of will We growth meaningfully unique needs comprehensive

began six of these our a platform In case extended in our over ago with this the grow As and years timeframes. relationship XXXX. result, to innovate continued customer enterprises have example,

large cases use often over relationship time. Our different with and expands across divisions suites, customers product enterprise

different with within of services frequently across to our provide product of lines various where opportunity business engage multiple we the existing business. benefit leaders with customer from lines We to larger organizations, enterprises particularly

our our case, XXX voice product this services. customer full In now suite our utilizes including

voice entered relationship IT one and Bandwidth’s of leading of territories. Internet company into is telecommunication customers. enterprises also deliver with chose power could XXX will communications needs countries a scale. operators solutions Africa. large, experience our enterprise and their rely platform company to multinational in to cost on of mobile the customer and U.S.-based of serves products customer benefits We voice at largest a for needs. and meet also customer capability the superior a new services a company was and Europe of across that services This suite provider and provider The with seeking The Bandwidth critical The global

grade all enterprise provides network at Our voice we quality IP with and connections that benefits functionality operate scale. and high offers economic own secure,

support personalized and commitment customer to dedicated satisfaction. customer demonstrate our our teams Additionally,

to this multifaceted accustomed with organizations size developing are in future. with do and deep the opportunity this of the to forward customer We look so relationships to

into new connects with million X.X a emergency This users entered with than we next-generation relationship a services. more quarter that mobile app

responders Calling capabilities Our fast emergency XXX safety Bandwidth's embed response. chose customers’ application. API their customer in subscribers Emergency into public to distress new these mobile to app and and delivers connect location first This critical for information with reliable

customers’ emergency on calls API complex call office based new back address used systems to center dispatch virtual our and by routes flows, an the automatically processes appropriate past. public safety app, point in simplifying the call provided Our answering

and infrastructure for lower on personal safety calls. Bandwidth’s true financially believe acknowledged past. than with non-emergency companies feasible so make emergency functionality to residential enterprise calling Emergency emergency solution unique Additionally, that allows to this security a that a calling of over numbers device We where manufacturers, for API’s a infrastructure. Internet large and number or may well technically police, without that Emergency Voice it embed VoIP is and sophisticated costly as are network a Things to Bandwidth’s their Calling API new not have Calling priority make into emergency do solutions accessible ability capabilities API which platforms replaces need of as apps without platforms, do-it-yourself connected calls fire to the medical been response, will rely in the phone and IP emergency

are to excited introduce another We innovative XXX for solution services.

takes API, so In engine. XXX, team deployed launching sent addition integrate to Emergency email a to and its to onsite a with simultaneously notifications place began our notifications XXX service an our feature within notification their plan enterprise, with email Calling subsequent by release we large an product initial this releases, applications notifications. along XXX notifications be for of notification voice extend can recording when with to call API personnel. security traditional SMS enterprises to our In allow We

We Kari’s which XXXX. all continue February, Law, systems, support to to telephone notifications onsite requires by calls multiline simultaneously XXX plan with

in And the era public of users tools and interact XXX things. of we apps devices, to we our notifications, beginning connect XXX the are with the safety more calling the emergency of with API using and with We are able daily.

XXX, to needs. In we for customers' platform meet to our our to addition continuous improvement strive

quarter, our enterprise customers. an upgrades second for porting we to deliver the platform experience to During introduced improved

to also populating We by a request in facilitate increased reducing session single over execution our efforts customers. have porting XX,XXX porting and automated XX-fold significantly our orders numbers inputs of to capacity single

one our United internationally. platform the product our are pleased customers Bandwidth we with supporting largest expand making in with their launch. are to we of now recent progress Kingdom is Last, enterprise the

by infrastructure our in We continue network end the the to track deploy our out but support of year. EU and infrastructure to build to the expansion in platform UK just the and complete UK the on the of are throughout not

see In summary, am Bandwidth��s enterprises demand I to strong on that pleased from build pillars. three to choose

that unmatched XXX of IP capabilities are quality and voice Our providers. vertically we unique network easy-to-use among highly that offers our costs our scalable platform CPaaS believe integrated APIs, and

service executing team and our our customers. focused Our best-in-class on remains enterprise to mission on delivering

call me to let Jeff. With that, over the turn

Jeff Hoffman

David Thanks everyone. afternoon good and

As David exceeded and for our top strong performance second mentioned, our both lines. of high bottom guidance the end quarter

benefit into business and to their demand from messaging to ongoing products industries voice, seeking services. across different and from Our enterprises embed XXX who are continues many

high-end the year-over-year the was which $XX $X.X of second of and total range. XX% total revenue, high-end revenue $XX.X CPaaS year-over-year total our our guidance above million quarter, Within $X.X revenue, During up our was above range. above our was up the $X.X contributed million million, revenue Other of million, XX% million million guidance. the $X.X revenue and guidance remaining implied

revenue $X.X a million comparison, was year. in As last other same period the

key the these Here quarter metrics results. are some that second drove in

over network these teams future attracting customers, our our increase our support. marketing cohorts, a we become to ended new business. the and to are more newly XX% they sales customer with active expanded customers CPaaS their with quarter for customers increasingly previous familiar scale usage percentage expect record X,XXX year-over-year, platform, and second onboarded platform. periods with up as Consistent Our We

of to second net Our retention XXXX. dollar-based quarter first and year-ago XXXX the rate as XXX% was XXX% of compared in quarter XXX% the a in

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

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

XX%. million margin and million, Our yielding margin in stock-based the second quarter gross excludes gross favorably was XXXX. $XX.X of a quarter second XXXX of non-GAAP the which This achieved compensation and depreciation, gross profit, the compares we $XX.X to XX%

again as the for of compared the period adjusted making XXXX million above year. to quarter This as development investment sales and Second same EBITDA well our reflects the marketing research as expansion increased of slightly platform. breakeven and last EBITDA are we in was to adjusted $X.X support

income of average weighted on million outstanding, basis, On based we quarter million $XX.X per second reported a or diluted share $X.XX GAAP net shares $X.X XXXX. during

$X.XX $X.X outstanding. loss favorable loss quarter per the and guidance compared is driven $XX.X in non-GAAP was guidance outperformance share weighted a as second a variance expense. per to $X.XX to by net share. quarter of million the our operating for average our on in based net non-GAAP gross shares profit The or net of loss second Our loss to $X.XX of This favorable million was

produced cash from and use. quarter, of $X.X capitalized the of During as in second internal and software for well development costs utilized equipment free as includes operating million property million cash $X.X which million we $X.X activities, purchases net flow,

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

$XX.X to million. of $XX.X million the up range of quarter to third expect we This to the the our contributes $XX.X of revenue million. range for total in midpoint at the million million CPaaS $XX.X revenue the at year-over-year to XX% guidance $XX.X For be XXXX, or quarter

expect million up XXXX, range. $XXX.X year we CPaaS full midpoint the in revenue range the be or the the to to of million at $XXX.X of For XX%

call midpoint fourth or out sequential uptick The up our factors. informed implied is fourth XX% $XX.X of implied year-over-year. in revenues our for $XX.X the range that to I by million guidance three quarter the want CPaaS to in million guidance at quarter

net based to products, use collaborate good as cases. and as rate, visibility dollar improving new existing maintain retention opportunities on support usage to First, we their an existing we well customers expect into as with go-forward our continue plan

as with David amplify dollar an that referenced are existing five pleased revenue our the CPaaS fourth growth. year earlier, opportunity is quarter Second, with we expected further to customer multi-million

our sales contribution revenue to our significantly and customers have platform, we we as new expect our attracting on finally, is our and fourth invested scale quarter Third more team in go-to-market customer increased growth. larger team the an

to growth It revenue quarter. of total year on drivers our the we midpoint at in and CPaaS range. that XXXX outlook, annual million, the our the million fourth the revenue the thoughts range the our is of Finishing to the in of XX% acceleration culmination $XXX.X be the particular remainder up for these guidance informs expect $XXX.X implied of in

assumes looking of outstanding approximately share. XXXX. with summary, to shares of weighted of quarter $X.XX to outstanding to In strong million. $X.XX finish the to shares half share and of is per earnings earnings XXXX expected approximately is average per million. date in for approximately are the share. outlook a our to the range in profitability, expected per range $XX.X the second Turning Non-GAAP forward of $X.XX to This third loss $X.XX to results a assumes we’re be average share outlook pleased of per This loss weighted for non-GAAP a $XX.X be

that, open With up questions. let’s it for

Operator

first Murphy Thank Please Mark question from ahead. Instructions] comes JPMorgan. The go you. [Operator with

Unidentified Analyst

competitors? did logo what pretty great. was any maybe Could Benjamin XXXX? top the that behind is them agreement of about the versus So want on And reason mean, of terms. the the be main understand a way in to the you double-click Congrats you you one. was on on deal? talked good And with? like time Hi, dollar deal I scale this that of X compete can behalf choosing there is large Mark. talk how the it gentlemen, about. some I a competitive Who seems to quarter,

David Morken

this you your out I were we opportunity wouldn’t so providers for regard incumbent surprise that three Benjamin, is understand to have the have, combination, to the thank which platform and be network upon question. competition faced that we joining. large our we unique. In and you one based appreciate

enterprise. In addition supports that to our large extraordinary team

the winning we’re have could remains customer, more very Most our to is term. within and enterprise where in incumbents the this very example, we’re this time here for opportunities with And of with we customers. but we’ve with when be in customers relative a be different, And XXXX, answer they an Verizon, point AT&T, us. And this opportunity be certainly we that We we doing large another the no and them. to grow an is marketplace, to top inflection it been that’s reaching working your since significantly this engaging the develop is near with are seen, whom CenturyLink. for question, also consistent simply our where will

Unidentified Analyst

Understood.

Okay.

on well, margin as high And seeing So gross well. of we good seems as like two expansion up, large to a you add about are level, kind talked here. just you logos, these some follow

can think do of where period, to the maybe new As few in – network possible company about a revenue any a next the scale growing possible increases? largest margin to think of in mix expansion period mean, later and kicks kind of accelerates is mean, term? a as more driven the it it I as over gross I near continues, the that the is the on you years. as reps in international while well the see your calls see percentage by you

David Morken

not at that and And that forward. history successful it’s achieve expansion. margin our we the line that will We been believe possible, well to as but revenue certainly top we remain both believe as only expect continued we’ve going that throughout possible increase

Unidentified Analyst

Street It seems know revenue closed reps, last guide of Maybe there new Awesome. The kind towards functional, one Jeff. is et expecting. the that more of implies Was was the ramp question QX. ramp large And deal the productivity there? deal revenue for like the mainly anything what the incrementally read when for this this from Or cetera? linearity – to closed? to Anything than

Jeff Hoffman

of weighted each we to was deal puts quarter we Yes. a and takes Sure. little give you there Thanks, best guidance. them. lot Benjamin. the bit update best And a quarter. fourth always endeavor view as our There our of were when This are more forecast, just certainly to is back one and and it

Unidentified Analyst

Understood. Thank guys. you,

Operator

Thank you.

comes Your next question with from Please go ahead. KeyBanc. Brent Bracelin

Parker Snook

this wondering new guys of that on Snook you this profile added of how’s lot or provide these Once Parker again, of on color voice mix the could you for with it was is customers Brent a guys. Hi, some wins. a messaging you? have Is and quarter. I Bracelin.

David Morken

and and of combination that our XX% the XX%, support. in that’s weighted business, voice terms And messaging voice the of the services mix revenue voice. with and is vast platform of new approximately toward to us to growing, we platform platform our an The is area emergency in past the being our recent customers majority customers the that consistent revenue, heavily but network come overall with remains continue for

Parker Snook

Thank you.

Operator

with ahead. next go Richard you. Davis comes question The Thank Canaccord Genuity. Please from

Richard Davis

much. thanks Hey, very

at obviously, CPaaS. the every grade high success needs a not an enterprise company of You guys been have lot end, but

CPaaS thinking can about and that? because As enterprise that an like need about don’t Thanks. hit just kind and not hobbyist enterprise addressable the and market kind need but outsider, negative, grade of that I stuff CPaaS, how don’t a who I’m of you the is people organizations between, should know, I think demarcation class

David Morken

should Richard. You capital, small. to essential as enterprise have One, headcounts where of that network. Many to But great to communications of folks, imagine deploy thinking our and they their they continue start business, might the relative you reasons. platform scale customers bet, two for primary not who them I’m of on they revenue. becomes economies CPaaS their to so fewer than scale, top-line grow exorbitantly-priced can

revenue a our often drives that’s function top-line scale platform as join of us Carolina what Raleigh, people And and to to North network. in so

operate Because visibility one able voice and to Our however, quality. own that second network, we into is the are network. reliability deliver and we underlying

elements or our are or XXX business think goes So, experience, those then doorbells service, in of the control and enterprises also reliability them smart an you since on And it saying if to our emergency is otherwise, we very you enterprise or without and platform, an reliability user would quality CPaaS of response application appeal And are doing just of that become communications the essential. add things, Richard, underneath quality command rely functions, that and I we if greatly. thermostats critical. last, are those enterprise,

Richard Davis

Great.

much. so you Thank Okay.

Operator

Thank go you. Erlikh with Please question The Charlie comes next from Baird. ahead.

Charlie Erlikh

question more about revenue? it’s XXX quarter. Great. you for in to what the CPaaS solid the Thanks do a for are the business detail capabilities. and on bit the us little Would a giving percent these mind as a grow APIs what XXX taking new APIs those and Could of congrats maybe general? actually really on that interesting expectations and hear

David Morken

some a apps responders. creativity are to better that support living address intend and to that a teams It and able API in provide that of frankly has time. room. are handset an location with street of emergency creative value providing these the that real And apps simply do set your our your to our fixed related is from handset that a handset They’re your in data than and mobile pull that of as the actual area more granular appeal the from the CPaaS of traditional certainly directly are is API to data folks revenue to for on grow really the are phone developing a percentage we information your pulling

using And but rich supporting of really XXX and we’re to team innovation for its proud our so doing functionality, this the area next all I’m so in last really and appeal period. API. to what and them generation just And that’s coding it very a is the launched by of

Charlie Erlikh

I question great. QX ask wanted about to sounds the really another And That then ramp. just

when I to such of of ramp, – ad those we part why just quarter had actually strong in and timing start start revenue? Is this customers when as do customer a reason question that because delay terms on that we’re the the As it mean, to deployed actually of to is timing expecting get the these how a work? hit you I new does quarter guess hit three revenue, six-month the or

Jeff Hoffman

customer, Jeff. usually is David significant that. short there’s you of revenue. said, as them of in and They the see lot that, typically had ads, And we ramp yes meaningful not we this get to is usually start third small but have Charlie. Hi, answer they’re a onboarding there, customer as I’ll starting to add a elaborate contribution. into the then where second a when quarter, quarter pretty revenue

the uptick an in second we’ve XXXX. in and now half the had we’re net see customer ads follow So last the revenue certainly, expected of quarters couple to as starting of

Charlie Erlikh

makes sense. guys. Thanks that Great,

Operator

Meta Please next Morgan Thank comes go with question you. The Stanley. Marshall from ahead.

Jonathan Lee

for impact your may Jonathan are be in It's to that how you Meta. can international guys. does other expanding question. taking region? On the my on thinking different give on you facing U.S? us than those that Thanks any a out, hurdles of Lee sense that build for Hi And

David Morken

business how this beyond areas the each be You water think in In UK we're son there, but steeplechaser, get how in to to are United to to executing regulators bet. in These navigate I an than year, what My we service get the opportunity in these particular know how of we're analogy. there is that we the and do right apt learned. States. or over may that's provide of we able used be hurdles and has front hurdle that know certainly these higher and a is now ends countries. and to The a that hazards in do appropriate European two

and they're And current so excellent launch launching an hurdles, they already continue they supporting of job anticipate base is we'll the team that insurmountable, in navigable, are cases we and and are and both use while rest UK support our UK throughout doing this the services EU to customer year. the and not in

a and and learning this learning has significant building curve spent and great But a come year until to and your this point, revenue anticipate adequate have contribution XXXX time far. we year it now we won't building But been so is beyond.

Jonathan Lee

Understood. enhancements can to that you any necessary steps you are the it articulate there taking And Is regulation robocalling. currently their prevent see as as you're for potential picture. separately,

David Morken

for the from shaking we trapped the active We with standards of years, and stir establishment vanguard in pioneers FCC have of present the of removed as offenders. network the one are those our and to traced and robocalling,

we anyone have network law with out We cooperated and happens our who to get are extremely aggressive enforcement who in robocalling. does cutting access to

continue we're an leadership space, a historically, leadership and are leader. it’s we've position, But posture we what be to with as industry come. in of others really So that seeing the robocalling our are if charge, leading both the clearly to will in of we lead relative now. to participant we hopeful years And and in the warning had the the as role early proud getting to describe had the in rid with FCC I effective to

Unidentified Analyst

Got one I could. it. more, And if

you’re there attribute based taking to? a do or with retention a So slight after customers you net the improved circle quarter. active that dollar existing last any initiatives Are back deceleration what increase

David Morken

better to consistently to current based retention. our drives those plans engage with part that’s what business our we And as understand for well are business as products really dollar new needs. to normal product their of serve this customers. And customers daily what that’s So net business

Unidentified Analyst

Thanks guys. it. Got

Operator

Barrie question The Instructions] ahead. & Thank you. Please Dougherty Company. go comes next with Jacob from [Operator

Jacob Barrie

Europe, of follow at that’s wants I you actually well some guys doing. online is over This infrastructure up hinted to in Catharine I scale know have that Jacob. confirm Catharine if, you have being on at? guess correct? international I’m Trebnick. built can Hi. been for you And where is One that kind the question

David Morken

certainly Jacob, UK place, in and Hey support software routing to the configured, the is servers, physical the – the infrastructure, that infrastructure is London is the and the EU is broader the and Frankfurt hardware that live. in

or regard in schedule of the build every out We in about on that pretty and terms of for are ahead excited theater, I'm it.

Jacob Barrie

awesome. That's

If with probably I just hinted you well, know you it – more you continuing but in the planning you've can – infrastructure on confirm, at you've are as are EU Africa? and or

David Morken

list based a we've and of current have service do customer today. We jurisdictions business they prioritized where upon partners our and

And path where demand so we're it pursuing following that of leads us.

to so short part the already international that is, from behind demand customer our and the is And our answer existing countries deploy exists parcel base. yes. It in plans

Jacob Barrie

Awesome. Thank for you. that. Thank you

Catharine like the – I've it explained from a capacity recently sales did force what that they and that brought fairly quarter? probably full I and this at have in question is hiring on me that are actually heard, if large so based – new sounds curious to they of to Another you've customers you she's are know you've

David Morken

to full quota hired, either the grown And cohort, have capacity. and sales those up orientation a Jacob. boarding a the have on capacity carrying ramp training upon as full upon through not significantly, period We to based teams carrying and go then And or is they full depending capacity. and to reached get of definitely teams time quota sales they are

or a even salesperson. depends salesperson senior upon different time of of a strategic There's ramps. junior the or that And more length length for

your the question, so as we're still So you're never last capacity and year this we've us the to people XX looking coming have the over you right and in hired six, because a case with of now specifically at significantly and XXX% middle speed are up back who months. that's answer to certainly always nine,

Jacob Barrie

kind Awesome. that. from from if direct you know company over trying question landscape, and current competitive from? Thank customers pulling with to of One a And better wanting to yours. that understanding mostly is competitors you some we're for we're gaining, have really other do you're if they get – new coming the customers you're of these are know know so, which of – I you

David Morken

AT&T We are folks CenturyLink winning Verizon, win and we who primarily customers that from. like business and with that currently business is do

technology also serve to to them. we're question? of is that, we that enterprise where So CPaaS yes, answer support that emerging market teams Does just aware but and getting are your important

Jacob Barrie

I believe have. that much. that very you is the questions all I Thank Yes.

So very for much thank that. you

David Morken

Thank you, Jacob.

Operator

are There this time. at today’s This you. further Thank questions concludes no teleconference.

may now for participation. Thank you You disconnect your lines. your

Bandwidth (BAND) 31 Jul 192019 Q2 Earnings call transcript