BAND - Earnings call transcript Q3 2019

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Operator

Greetings, and welcome to the Bandwidth Third Quarter 2019 Earnings Call. [Operator Instructions].

As a reminder, this conference is being recorded. It is now my pleasure to introduce Sarah Walas. Please begin.

Sarah Walas

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

XXXX call, that our forward of considered statements concerning the may financial fiscal we for and looking, extent make fourth periods. related statements of to will the year be During to business the guidance XXXX, our full the future including quarter and provided

plans Our customers to and our and strategy, new maintain regarding statements our our plans to ability on execute other profits. acquire existing and growth

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

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

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

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

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

David Morken

last spent be quarter Investor call Investor for Sarah, Bandwidth efforts. Relations Raleigh Manager. with Sarah. to and you. various in us, including She lead working you me on Hat excited Red all Sarah our to allow years everyone Relations earnings at Thank Walas X-plus today. you, here We're our to the introduce in please to roles, you third joins joining finance Thank

pleased top report lines. on bottom third expectations exceeded quarter results I'm our the and to both our that

revenue the driving the of CPaaS our by existing net in continued XXX% organizations results $XX.X dollar-based traction emergency network quality with total year-over-year, deliver for net marketing reliable, quarter, platform increased record communications XXX CPaaS messaging Our adding has prior are XX% are the established highest and and in robust our rate. and to momentum services We quarter platform. amazing saw demonstrated sales and These a ongoing range a year, successfully our increase serves cloud-native of that that resulting revenue from evidence as million. retention was within diverse XX% website or providers voice, in organizations teams, device. software, scalable Bandwidth and customers application, choosing a a hyperscaler reputation any require the a Bandwidth's team who customers

as We provider of to choice. gain recognition CPaaS continue a

in IDC's which identified leader to integration. and core services among communication of Communications assessment. focus as in segment are Worldwide are infrastructure network a primary providers ecosystem platform leader a The study that both IDC's Platform Bandwidth CPaaS create was In scalable. easy of the development real-time included September, and to MarketScape ability named innovative was and attributes, Bandwidth an a rapid establishing the capabilities, platform's Cloud pioneer across facilitate was XXXX

our key serving customers to our recognition ongoing commitment are and elements dedication and of continued success. team's Our

customers. that Now let continued me traction highlights our share a our demonstrate few with

XXX a an in principle announced last our Fortune large earnings with on company. First, agreement we call,

makes provisions of millions that our Bandwidth well to X-year breadth regarding discuss signed this agreement our the tens we last significant and large excited the a majority exclusivity expected enterprise services of detail This for earnings vast in as in we soon agreement agreed definitive depth XXXX. committed said, in earn that are and the is of as That of revenue them. revenue We to issue one that call, other relationship are provide after to the that confirm customers to fourth this and our signed timing opportunities we creating will largest quarter. customer

response we to growth messaging from the across our the messaging products in see continued messaging introduction consistent landscape. industry and Second, of new changes in

solutions have on to deliverability mission-critical facing required customers the and reliability communications. are messaging resonated challenges Our deliver utmost with who enterprise seeking

to a job XX and blocked customer sent with toll-free All-IP solution, nationwide able the Bandwidth's XX required in by visibility company volume and onboarded challenged serve each dedicated messages with underlying We was our alerts online with throughput and million messaging recently into visibility fastest with with customer The to site Using million causes. scale. delivery the AXP job company visitors worldwide requisite and the ability no Voice was growing support remain messaging unique to platform, improve customers the We monthly feedback day. achieve at teams. Network our operate

teams customer, teams operations mitigate messaging to deliverability different the dedicated the Our network across rapidly issues enable in misappropriately the able to company customer educate to teams In support company's and of industry case support network unlock and on changing order to messages the our proactively environment. and blocked collaborated our navigate this are profile messaging our providers. traffic operation with partners control

Bandwidth's rate of switching messages response solution, job customers' to messaging As alert doubled. a result the the to toll-free

that user based customer XXX,XXX enables APIs service virtualize calling communications provides end companies their infrastructure We are to business and to cable on the as the company and Bandwidth's focus than Bandwidth a their relentless voice voice company on users. a network owner-operated for a company's serve also to solutions functionality customers. VoIP were U.S. and power APIs as companies. ideal as new to This their our existing of platform to top on well cloud. voice to our more of cloud go-forward success. the basis majority to quality and serves connectivity providers company on voice will XXX the and experiences the build pleased outstanding many announce of with enable decided The XX our residential customer platform partner relationship and power next-generation cable exclusive easy-to-use to IP because The selected network robust to and company reliability the

up to and We serve and service uses are opportunities excited to open communications cable platform relationship about providers company the market. our how this network large new

data In and London of previously our as the addition, in is on in the deployment end are EU reported. complete centers by Frankfurt to complete. we year build-out track of X the U.K. and the The

great satisfy make requirements deliver our to continue as the internationally We to business necessary and progress planned. services to regulatory to conduct communications

in XX European for which expressed greatest Switzerland. members those customers demand. efforts the have We European the focused countries, our we're of authorized Today, the XX have in countries existing Union business U.K., to our conduct and

have regulatory telecommunication well. We as services European provide obtained authority also XX to in these countries

These strength summary, and strategic quarter to and to Most that and demonstrate important their significant of these recognizable among period. our minimum largest with underlying solid we provisions are and for of in strategics contrast, largest fundamental win network a our our scaled find the the simultaneously using group users In toll-free our the legacy the among the committing be a faster strategic our incumbent of than single who before said, messaging, or platform to This proposition porting to giant a Such platform use full we've these at XXX providers. past Bandwidth new customers value learned customers often of cases. business. deliver of ever primary in network. customers a exclusivity order third are single provider. combining CPaaS company lessons XXX, of single seen, strategic our replace the By Fortune includes a have cases That our during single-use platform we've broadest to us expanding results voice, Internet category are to other our scaling number in customers numbers, revenue customers engaged prefer the ever part capabilities customers. from source and

So both high and and to of to taking volumes multiple move for numbers these we to strategics up platform. to expect onboarding, take XX instead integrate usage XX of our to or port APIs to types days mission-critical of days now XXX

of customer the longer XXXX ultimate in than opportunities incumbent more kinds would are strategic also Simply our bodes in times annual average legacy going a average contract our Jeff providers are length. put, than onboard expected significantly what This many lowers to deliver and they fully underestimated new but to for take would large will accurate forecasting X.Xx revenue. contribution These up to strategic committed us. These and new X-year which along, transition time annual term or QX customers that customer accounts, for in are well contractually it we lengths be, beyond, term close signing and strategic from would usage unpack their and the to moment. these but new when revenue strategic guidance, new were

mission be to on largest best-in-class to to customers. opportunities optimistic dynamics growth enterprise delivering our I our about our our continue scaling focused we these executing ahead, remain and team service on our thank Looking despite want with who customers.

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

Jeffrey Hoffman

Thank everyone. David, afternoon, you, and good

strong another delivered team in QX. Our performance

million, line Within above $X.X $X and high million our in was and revenue third XX% CPaaS million, the last high During million end the above revenue our was guidance year. revenue the our implied and $XX.X which remaining the revenue, up contributed than $X of million up range. XX% same total more above year-over-year our total range. guidance Other year-over-year period was guidance the revenue $XX.X million, total with quarter, of $X.X of end

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

customers XX% business. to percentage X,XXX team customers, increase active for setting platform. continues to CPaaS with year-over-year, ended our Our attract expanded quarter go-to-market up We third new another the our record

support. customers their increasingly with periods expect onboarded network platform, as they future to newly We familiar customer usage become these our and over scale

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

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

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

in and XXXX was third XXXX. a margin achieved gross as of third non-GAAP yielding of the million gross quarter profit, $XX.X the margin $XX.X depreciation, which and stock-based XX% million, with compared Our we compensation quarter gross XX% excludes

support $X.XX weighted million basis, based on share or million the we a expansion development shares per XX.X reported quarter compared of On period the adjusted Third and expected as sales last loss change adjusted marketing EBITDA a investments This the to was EBITDA in XXXX reflects year. as of $XXX,XXX of of our third loss a well $X.X quarter outstanding. and making platform. research of net million a to $X GAAP for we're loss same and was average

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

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

like to financial outlook. regarding our I'd our Now thoughts expand

similar usage principle a services This last category XXXX from XXXX to Likewise, of extended later ramp. usage and the wins with this we scale, earnings referenced, delayed anticipated. full customers suite multimillion with in now previewed, dollar our expected and taken revision. in we're timing a agreement David a call of annual sizable to customer of exclusivity thereafter. meaningfully will longer deliver impact David As are platform revised executed wins contributed reflect expected company guidance platform has that breadth The in which, guidance engagement X-year several to result announced our at new required on strategic seeing strategic other ramps the our at scale to in than includes agreement previously annual services full in XXX once, for than as all their an aggregate, revenue and quarter's have Fortune many shortly

Of these We The strategic XXXX our failed is during nearly half remainder following timing expect earnings annual last issue. revision or revenue of of the guidance a onboarding million capture the call. XXXX to quarter guidance the for detailed period revision, in correctly estimate customers quarter. $X of the majority to of $X signed second we million of in the approximately it first and the

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

$XXX up be revenue million XX% total range the to We of midpoint million, of range. expect at in the $XXX.X annual the XXXX to

Non-GAAP a to expected earnings $X.XX million. outstanding average of outlook weighted XX.X per of to is per shares approximately range for loss share share. in be XXXX assumes This the $X.XX of

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

outstanding profitability. $X.XX per in be per XX.X This share. to expected approximately earnings the average Non-GAAP assumes is Turning $X.XX to of to a share fourth of loss million. weighted outlook shares quarter range

XXXX to quarter initial fiscal third While time believe we revenue provided growth. provide forward at calls, it's we our historically haven't prudent on guidance this CPaaS thoughts on our year

of top since and Our line for guidance team quarters quarterly becoming company. is our growth for exceeding straight a proud public meeting bottom X or

of committed consistent deeply disappointed are Previewing annual February committed to rather waiting believe and approximately goal we investor XXXX growth are our revenue is making strides managing in until than expectations XXXX. the accurately will returning We in timing We commitment. that now toward discussed. CPaaS in reaccelerate to and XXXX our issues revenue to with XXXX profitability are to CPaaS XX% our

our types many relationships. we've customers on excited to these better deliver there customer our remain broad now As these lines and understand note, accompany a capabilities We time of large that communication opportunities trusting never their a more final win of had has our onboarding period on been where needs. for to We're so the focused plan. large team executing

back to call With for that, your the operator questions. I turn over the will

Operator

Instructions]. [Operator

first line Canaccord. with question Our from comes of the Richard Davis

Richard Davis

Quick question.

this what know -- you a XX, I least scale know like but to we pads a question to high -- and jump a just is have a to bar the and But How hard level? confident at but -- I you a giving you mean, so like, just is we'll because X-foot it you are get is a details is XXXX. do least would like, what thing, -- weird extent this for the titrate So well, the however, obviously is jump like it kind like setting know ask how out spectrum understand to this X on high or you to level that? we're trying degree of bar? help it's like, ourselves -- are how confidence, at or out I'm about of then of do guys, broad -- us on but and on can question thank I clear plays I this confidence -- of answer,

David Morken

David. is Thanks, Richard. This

on our estimates. So for was forecast based QX

Our and guide understanding our in and QX $X million confidence XXXX we recapture QX, and about that is on in evidence. $X based million

to they're new is attributes have represent we just are several in that they're cases, signed, are So integrated. that this that revenue and And strategic customers of us flowing. and new not handful characteristics signed,

with like high about your we So instead blue estimates, I pad about revenue bar, not that but extremely we're put being confident, we number evidence, there. probably and XXXX timing analogy, are dealing somewhere it's between of just but and out this the achieving the only a issue, the

Richard Davis

they that was over -- person. did friction delay is your real that? or I'll deployment the then with customers to any it to in Or The with And there then turn good just next regard And upset at all, quickly. were that? that

David Morken

friction whatsoever. No

quickly Our is and extremely agile. team moves

Not bases pretty we've the that customers largest we move than understanding we to called timetables over do. slower ever tune simultaneously who these our platform that customer set, that the So installed was ported quick. have a that we

Operator

from Our next question Mark JPMorgan. comes the of line with Murphy

Mark Murphy

and software or messaging receiving any at like Google, be leaning from companies Amazon, RingCentral, confident of indicating of they're growth Slack, of more network are you in your less using pulling like type are they're you them Internet cetera? the Zoom feel some What all? aggressively? higher that the back Or Microsoft, and et customers, and Do would

David Morken

our evidence segment [indiscernible] that. the very and But is growing VoIP and XXX is they're business both overall, growing UCaaS well, the well. Mark, of

Mark Murphy

signing up us customers QX? there you of dozen size half booked Okay. trend any you else help the or comment and think about Is longer that to? who grew can contracts? verify I In are you way strategic other how backlog year-over-year? speak the visible can business words, there in a you're on Or bookings talking to is maybe you in that's to just a anything new value something

Jeffrey Hoffman

last with in you a existing revenue have degree not in million we've that's and It's where we with a integration And in when quarter to quantified testing and issue these a Jeff. volumes is usage-based we've we it $X now. need of is signed through what That's get what a being once that these million comes and $X to, of million you're today as revenue $X first we're period. going business, in. volumes attributed issue deferred said, That confidence XX of come agreements from a days the timing David that to realize booking this the high Mark, see will we well that, seeing that integration So or made on the of over as the get of progression number. are and the we're quarter XXXX at And through which confidence that customers second XXXX. so

David Morken

large that largest describe answer XXX is would very did talked XXXX becoming we customer only among I well, add, to about, your that in we Mark, And our customers. Fortune question as the

Mark Murphy

Okay.

it to do or you though volume speak much of can't did QX of that from -- year you kind of as -- be to new going a ago? in signed feel revenue. you Is potential higher not business a mean, you QX than deferred it's a in Understanding bookings I okay. standpoint So

David Morken

By far.

Mark Murphy

think far, year. growing had XX% Then, next okay. we revenue I CPaaS well, By Jeff, already as

so why with deployments would that coming year year? the the out of slipping 'XX, trying XXXX, understand, bit maybe that to from base faster are in just And down guess I bit the to not a there a if I'm on be growing XXXX

David Morken

then go XX% logical over We're issue It's as to fourth that guiding is We've expectations to have pushed XXXX We're first question. and this as team quarters X had us that timing our principle. out public we're a 'XX, the about intuitive I'll hand we in a principle and to guiding a is team And the meeting the a of as and Mark, operating values exceeding from against first a Jeff. we quarter straight leading and in of David. So 'XX. for returning it company. committed a also remains talked something a principle profitability XXXX. XXXX. that as are in day X primary to of we've into that company team And

And eye those and to including a highly we Jeff so add both across top managing expectations principles keen to value that But that on that. ask XXXX. all and we serve, pretty this the the investors, very guide inform me constituencies -- both we reflects the lines, fact constituents bottom approach we let how also

Jeffrey Hoffman

the for because think of always this products term, lot provider to turn trying is to in business large once. is multiple best the a customers What endeavor of with who I'm time bringing this this and primary business. terms own is I integrate longer-term ways are David. we I Short provide and quarter favorable lengths, Long it's and that's for up stronger that learning we contracts our And Thanks, single-sourced term, volumes provided, in at have here going and and a at think thing we high forecast the being pain. that. a fantastic add thing had we definitely you to a

Operator

the Our of next with Baird Will W. Robert question line is Co. coming Power from &

William Power

Maybe a first, clarification. just

time year. about guess, that on just on color trying And QX, Fortune you're $X from the the any track the $X expecting other that you different XXX of ramp, all are next for of into million those on impacts on color the cohort comfort majority Is moved here. so, for maybe that to to thanks the QX talk So the like companies other numbers lines as as companies million of company? the into I if well. get

Jeffrey Hoffman

Will. Sure, Yes.

exactly retention going factor a it's business net tell as can the very issue, that XXX who that in of strategics different way. So positive And the rest we given the forward I new an and timing our it as What impact particular annual are a long the behaving biggest to that that was guidance existing in way sort sized outside it the haven't you Fortune customer. is of favorable customer, far these again, in revision. was related once term. dollar-based But will

feel and good strong, Our about third a customer in new the and things we the of we lot metrics remain really quarter. accomplished that business

William Power

I retention you -- the answered with partly was one me to net existing of QX impact maybe let second think, customers, existing know ramp in guess, your have the maybe customers So on and among usage expected your QX. help I elements just question, broadly. given will rate, that growing I I you its the guess, it,

what that now about decline the big into customer? So generally seeing QX, that number will in because kind do there? how of of we retention rate? terms of trajectory the Or think you base XXX the across And what's are

Jeffrey Hoffman

will. It

about I revenue CPaaS the is way would think midpoint quarter Will, of guidance was fourth our the XX%. for So it,

more it holidays in of which our by on business. quarter. was think quarter, growth, some was in once being, we the X% on relates about you and fourth I a of basis, you days in driven quarter to can in us on always what have a quarter. that, third be We're headwinds, dollar-based that fourth because the and pressure new a third are challenging there's going and logo business retention look some to in have will into get always net can and at fact revenue sequential back fourth number usage-based it's quarters kind be again, more explain effective lower And a for quarter, certainly we fourth it the To there. than trend take

usage, years, don't mask in factors that business usage We other this another as like that days. this has and like previous platform as drove higher usage why had the year, see we higher favorable the year customer last numbers where this Now large driving election been they year-related by happening, effective headwind masked that's do. from well that look

William Power

maybe And additional up. one Okay. just quick follow

Just is the on the efforts? of expect new half some of is that and delays, from ramping, to customers next in kind are -- timing that more that those first investment requiring given we through commensurate of support the you increase cost all? year Should

Jeffrey Hoffman

the No. This that's been these is opportunities our delayed. Again, identified. customers knew all these just of plan. and been It's part really have we onboarding

So capabilities and in normal trusting just more of, more at make they along integrate course, us sort want and ways, I any where opportunities many way. our confluence of one that wouldn't is are to This in maybe time than more larger with a changes really a way ever. behaving

Operator

Instructions]. [Operator

King of Dougherty line Our & Co. next the question comes from Andrew with

Andrew King

Just two quick ones.

First, for with you just to and then from play. new those bit seeing when long give you're would process longer into had how of mentioned you color these recognition? of the you're see take logos revenues starting time ramp you say also, sale. international, And the us little come now closing a since seeing onboarding a into About that more can revenue you

David Morken

You bet.

are begin integrate recognizable that but of to we generating the who the to generate to our lessons their are come in our includes embrace large onboard, within the response In XXXX, guide days that XXXX bases. as platform our It's and track, your different XXX tonight. on gave given it's breadth captured revenue year. they XX XXXX throughout revenue revenue, the is question, customers existing these out first for days international to And view deployment forecast from to forecast customer will averaging we that gate these base international second to our our large right of those are from learned So XX and revenue. the up recognizable including

Operator

next of line Our Morgan Marshall question from the Stanley. Meta with comes

Meta Marshall

strategic and that or the how of Great. then -- kind of kind bogey six is Maybe question. the ramp international just it for the second, just on international international focusing on revenue a throughout account of Or is expect not And maybe to part year? should we new second the accounts?

the but know seeing You a makeup I or of customers, a around customers the customer the sales and just throughout of smaller kind of on of number of just guys strategic kind what larger you're you've in spent kind lot time added the quarter. effectiveness base.

David Morken

within throughout XXXX, talked Meta, the And that quarter you category. this our revenue we sequencing international customer mentioned cohort as we that described about new do the What haven't those existing is where in. to And international are by is how are how is we remember business. consistent and we that is that in authorized you'll comes following demand markets demand from our revenue customers.

existing the more detail our for online, initial haven't contributors jurisdictions throughout come revenue and as we quarter-over-quarter slope the of working revenue about XXXX. are customers international, So with but provided those that

Meta Marshall

versus you're or versus bringing that seeing on then expected? everyday far course, you're normal maybe the And as as effectiveness ARPUs sales of on, customers what the kind expected just just and

David Morken

Yes, greatly our seen a set in marketing expanded as onboard for record we've teams new logos are sales as and ever team, leadership of QX, to tribute new sales we've in and it's those past. and efficient coming our the X a teams the

very efficient efficiency. because and that on depends very, upon logos. sales so And that important that's generate continued I profitability to we've returning spend think those maintained marketing And to

we of fundamental anticipate with as new tracking XXXX. including are of the this what base, across customers. we today ARPU, the the forecast to no There's ARPU change, base or we customers either As cohort that have we

Operator

the closing floor me We hand Allow question-and-answer end have reached to remarks. the over of session. our for back

David Morken

beyond. the and team Thank this proud you, and on the you. and call. XXXX year and to strong Very to looking to forward Thank thanks closing out of everyone entire

Operator

Thank you. today's conference. This concludes

at your and this time, your participation. lines You thank may you for disconnect

Bandwidth (BAND) 6 Nov 192019 Q3 Earnings call transcript