BAND - Earnings call transcript Q3 2020

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Operator

Thank you for standing by. This is the conference operator. Welcome to the Bandwidth Inc.

Third Quarter 2020 Earnings Results Conference Call.

As a reminder, all participants are in listen-only mode and the conference is being recorded. will opportunity there ask presentation, the be to an questions. After Instructions]. [Operator like I’d President conference over of hand to the Relations now Bandwidth. to at Sarah Investor Walas, Vice Please go ahead.

Sarah Walas

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

During future forward-looking, of fiscal regarding pandemic full year benefits our closing the the impact our timing considered the including to the statements the of the related of proposed of expectations XXXX, proposed concerning periods, quarter the expected and and the and guidance and will our business. transaction provided the of transaction statements call, fourth make expected to our around statements the be business on Voxbone that COVID-XX extent, may financial we for

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

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

in by please XXXX could and refer factors other on February updated results, XX, affect actual of SEC our discussion For filing material that risks, important filings. XX-K a to those contained as our other

website on available sec.gov. of Investor at on are SEC's the our website which section at bandwidth.com and of Relations All the

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

David Morken

much has I Thank the to results delivered Together, he so by With you, Sarah. provided begin Welcome, in news God the everyone. team seize us. thanking need opportunities for our record to quarter. strength the good to share,

our are you thank than over soon is substantially we communication Voxbone, you annual resilience our Bandmates us joining To on We communicate ever raising develop my and now and aboard, To deliver acquiring when season power the are revenue our be to mission Bandmates, during at stamina are your ecstatic are expanding countries guidance for welcome the Voxbone before. to worldwide. XX that vital into we the globe. and enterprise around more to

During ever higher this quarter, demand our was before. network software than and enterprise platform for

was a increased all by services. cross-section record revenue a accelerating This CPaaS Our usage diverse of customers of growth driven our year-over-year. XX% expanding their

unique Our network and customer platform, operating enterprises with scale. enterprise at support resonates combination of software

run year-over-year. industry-sanctioned to customers We up extraordinary week's growth by ideal volume presidential which powered driven the traffic also amount group high choice to This this be deliverability. achieve an of XXX% increase messaging to by election. grew Our was messaging, of unprecedented an for proved in political was next U.S.

spend volume usage and gives This to expanding Our bolstered were company well customer cases delivery our customer's users requiring send, relationship solutions. for messaging known ability an and also enterprise-grade driving on platform. delivery confirmation. point-of-sale growing results high the application-to-person fast receipts an store utilizes customer by from messaging money, which increased is our for of solution innovative toll-free messaging division, mobile use The

enterprise continue to expanding relationships, customers In existing to platform. we addition attract to new our

increase milestone surpassed we of CPaaS an than more customers, now serve another X,XXX we as quarter, XX% This year-over-year.

on-boarding well, net executed marketing XXX Our customers have in new quarter. the sales and teams

record continued also goals. to and achieving our exceed growth customers While profitability we new platform, attracting our to revenue

bandwidth two enterprise two the that representing least global each customers serve plus companies this by And voice more same we be brilliantly. month, Europe XX% We we share soon other has combination GDP. our them States. leader international the network. the United at of transformed in different cloud XX values years. around decades, our We our communications Earlier than we shared and languages. of two with the CPaaS across started Band. in Last now across countries believe will this expansion using leaders that accelerates enterprises software-powered For world's international several communications serving serving Voxbone will joining together The year, can describe customers complement our globe we

others. are serving while mission-first, committed to We

scale. of teams set We basis values harness between by communications control the of to we cultural an worldwide. quality, and shared platforms incredible strong the chemistry network, giving the customers is both customers modern cloud powered and fit will Our offer a serve

prided XX consistently expanding the base. excited on deliver the our a infrastructure and country enjoyed a experiences customer are has added serve opportunity have innovative itself to same and footprints. past years, the teams to large Voxbone coverage Over for strategy in Both compliance-first customers

will launch, customers a for benefit from rapid unified software and Our network and hyperscale and communications, experiences. of platform applications the

has Bandwidth The and team conviction for given enterprises. global applications, members announcement enterprise-grade offer total platforms, on ever will connectivity positioned will than the Fortune acquisition from more cloud before. reaction that us and XXXX We be customers mobile uniquely

results than quarter, history. in our before greater ever our delivered team This

and me us businesses acquiring are I and the turn amazing remain I that, to Jeff. this for season. While during the proud my in teams am around of most With and humbled opportunities who will of all over world, the afforded impressive grateful one we it many Bandmates, with

Jeff Hoffman

for joining expectations. on David. results, Voxbone. exceptional far top us exceeding at both to and including call, had you, drove our everyone And friends which Thank quarter thanks our this an We bottom-line

contributed is $XX.X the continues CPaaS the from percentage revenue another Third total which our revenue up million is quarter same year-over-year. year-over-year, core growth in our the the was The $XX.X record drivers revenue, from of remaining up new period, XX% million, total revenue of a for was come which period total ago. XX% the year Within to XX% Other business. revenue business. revenue million majority of up $XX growth

have quarter. we amplified However, two the factors did in results that our

messaging the elevated First, in elections. upcoming usage driven U.S. we by experienced

Second, volumes X% to to X% pandemic. year-over-year two quarter-over-quarter. we usage. approximately from continue these COVID from benefit the CPaaS as decline previewed, have ongoing work And revenue third COVID-related this to from caused growth, dynamic added Combined, and political messaging coming quarter by factors XX% our the from we with impact continues anywhere

XXXX. messaging high to additional going strong carriers quarter, contribution was on we in continue existing retention XXs to by quarter. new And addition, increasing dollar year compared ago. XXX% surcharges implemented Despite margins On messaging September surcharge expand we remain factors, associated messaging in XXX% expect In and these net the the gross in AXP customer outperformance serving gross other with primary for year based fees non-GAAP in the relationships, as highlight for surcharge I higher our strong track to of our a The want to growth evidenced toll-free to our demand. driver achieve revenue solid as quarter, margins Xst, continue the messaging of we full forward. rate an these and at logo XX% accordingly, our came our

evidenced $X.X income the as growth We top-line balance result and with expense by quarter, as favorability. This third continue driven share. $X.XX to or operating our non-GAAP net in is over-performance, our profitability to by well gross million favorable profit guide strong per as

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

of of on the one, $X We strength in receiving the revenue our Voxbone expected are business track raising from of equates approximately our contribution fourth acquisition fourth revenue close revenue pending we anticipate quarter $XX This annual of our more third million foreign anticipated currency current from Voxbone from be over-performance continued with the to quarter than two, will of in $XX revenues, fourth as the revenue Voxbone over-performance, strong included three, the Voxbone to accounts quarter and The CPaaS XXXX from third to of remaining million as; conditions XXst reflect: and demand well acquisition. by total $X.X guidance, guidance rates. $XX Other in is which and will million our quarter; segment. fundamental standalone the from the increase million total in This The for quarter and the $XX total more contribution October million business our million the XXXX. our services two annual on guide. in exchange contribution months raise, coming for than be $X and contribution million current approximately to assumes

in be In CPaaS XXXX of revenue, $XXX.X million have year to of $XXX.X full raised to million. terms our the range we guidance

million $XXX.X $X.XX shares of acquisition. assuming range to the XX.X the in the to earnings per our weighted We're issued diluted be be to XXXX to that pending conversions, want to for share to related share revenue Voxbone includes year the and total full million. expect of non-GAAP debt for adjustments range share, shares We $XXX.X convertible count highlight outstanding. $X.XX to per million average in be I estimating

Turning to our guidance XXXX. quarter of for the fourth

This summary, for call of our business. was expect share turn to expected million. share We fourth that, $XX.X weighted the this be of Fourth to $XX.X third momentum million the our of per diluted the in our $XX.X for total the we Q&A. the let to into per range XX.X to and In quarter an positive million quarter forward And operator contributes is range million shares be outstanding. guidance quarter look beyond. to non-GAAP With million. using driving revenue to to earnings average me back revenue in outstanding CPaaS quarter $XX $X.XX $X.XX to

Operator

Thank you.

[Operator We Instructions]. question-and-answer the now begin will session.

Murphy with comes first Your Mark question from JPMorgan.

Mark Murphy

congratulations you Thank very Yes. nice quarter. and on a

I'm spike cases does reinstatement at Europe in thinking flare up the that kind of does your thought of in that your wondering, was of of peak all or all, affect the the the in remain process? usage COVID lockdowns First April

David Morken

We'll that's Mark, it. how we think remains currently the Hey, keep now. conclusion But David. this was April our watching peak. that right is It

Mark Murphy

that? reason on view of API. just offerings, perhaps bulk the industry have announcement up. benefiting did Communication those Okay. David, I'm you any our customers Bandwidth curious as and I'm follow Azure see also we from of the asking noticed, Microsoft SMS Do you a see RingCentral's you Bandwidth, benefiting a Services, do -- how of you that is announcement thoughts of the given Part

David Morken

fans both for do that bode think does Microsoft announcements, RingCentral and both those and customers Bandwidth. it well for We of cheer for their big

Mark Murphy

are one traffic final is originating that looking other is, us words, at center from? In can -- there where exactly The where internationally? data Okay. voice I’m walk would where the or you through anything you counterintuitive? Is David, locations? can be Jeff, the is wondering, Voxbone And there

David Morken

counterintuitive. think be don't I anything will

from aggregation demographically points and use. coming largest contribution where country find GDP important the largest that where The the stack the about are think in located of and complementary are centers there's meeting good data carrier protocols countries. the can traffic. You networks you each The

So intuitively, transaction, the company closing great really architecture I think made excited very together. team, sense to as finishing our business their and we're the diligenced the about and growing we've has

Operator

with Your next Bhavan from comes Blair. Suri William question

Bhavan Suri

I question strategically. process, guess bit, a on I thought little that up David, just to want follow just your

that don't underlying gap you future, leverage see in so you the the of too now foreseeable provider, of the line there’s sort want again, today? infrastructure technology, provide been competitive. moving platform embedded, at drawing to be guys start But about remain more and has to you technology providing think and of value? for about say like of you cetera. got political something get Do the to that How fill to more a RingCentral, how the that built or sort of strategically with application, would Microsoft, application you love guys, sense, that you you some maybe let's these with stack arms an specific that So, to make think least sort the do you space do the application, you've philosophically, about dealer in think could and just you et where that the Or very all Bandwidth get up about team? know core you think application messaging sort

David Morken

gives more addressable total access CPaaS XX% the world's XX us home of outside immediate plus of North of thinking We're territory in here GDP, acquisition vertically. countries. XX% was our than horizontally to Voxbone in America. market The

well. that is important to of for the think we full we Voxbone most write customers market horizontally, the where chapter focus really North so team we That's with addresses for serve next so in our terrific And us America. the one entire do that many is now, market right what already with the addressing the

as to great from But because world, our central CPaaS going now done do a the what I be the part system you're there be so impetus please for customers think right enterprise forward and serve the you've there the will add your opportunities that of customers, seasons here. will -- the provider, is, us really value. us, and well more around for emphasis nervous for

Bhavan Suri

well. do so To

David Morken

Yes.

Bhavan Suri

have I quick a then follow here. And up

it. You’re of appreciate this types you've the these obviously very things But pipeline some communication I given large these of sort us in of the of providers. new some the is sort past one bullish of color of of service customers, --

type of Thank forward? should How deals think past? is acceleration, Or very deceleration? cadence impact how And very, going? do of developing Just cadence has you've COVID any that either on these see had the class the about kind pipeline the you. how large, of you talked it about platform those, we

David Morken

toward The in service bet. turning progressed nicely this year last end expected. has that the really as You up of on-boarded year we very we cohort

accelerated our regarding our forward, We've, type customer recall, I about of And that we coming negative COVID platform service to own don't cohort caught think you'll As that that offer group of the we And broadly. up to happy new of report network. been fact, provider customers is that there impact those outperforming estimates customers the in COVID nothing utilizing to and that customer. going value projected of onto internal on-board. regarding a

the And as at expected the is think, of pipeline, beginning the year. so we we

Operator

with Power comes question next Your Will from Baird.

Will Power

on Yes, I'm I what have the way I Okay. Any that. on fronts in then for guess, some messaging contribution a a to color thanks the QX. questions. flavor sorry of question. Yes, guidance? assuming contribution, start work couple I and political with second for anywhere for if for Great. get missed the that, I'll those QX you're

Jeff Hoffman

I'd Jeff. question. be take Will, is to this that glad

the terms beginning of fourth at the messaging, see to of political strong So from in messaging. we volumes continue quarter political

election, to materially election but previous week next through done the as in that We carry in expect they've thereafter dissipate cycles.

and On that down, the quarter, to as each we've we seen compared COVID fourth third the expect tick to the quarter. in that front, demand quarter elevated continue

Will Power

and QX? to QX of not being or mean, just questions earlier guess that of this continue point? does be you with yet through clear, into And seen of to the change I first is I kind -- have Okay. I lockdowns that reinstituted, the And the perhaps one ask at so thinking reason part probably start your

Jeff Hoffman

this on We we're far did it see comments in down related the quarter. third COVID come That's as as going at the to to point. go

And so we tell you. can that's what

Will Power

you And Okay. the of core kind just strength. breadth in kind then in be I interested guess broader then QX, of I I'd that strength guess, the as look at of

see enterprise versus you been contraction. your help understand of communications where customers strong. to we customer to UCaaS set growth unified on growth continue You've cohort, got trying which Maybe meetings, know based us have providers, qualitatively probably there other the the broader your

David Morken

David. political come a doing mentioned diverse called and point-of-sale enterprise provider company the COVID from We provider is the cohort on-boarded. indeed The I of scaling service service services a and -- this Will, was nicely. that did financial that the customers. of a callout one good There's growth tailwind well. was cross-section customer of the out outside

really is So well just it's performing UCaaS, overarching customer the CCaaS. diversified. base It's and It's [Dubner] not broad.

Operator

Company. & Needham with Valera Rich from comes question next Your

Rich Valera

XXXX. Jeff, getting we're pretty close to

think their look terms much So maybe -- models of it any will here. to the million -- point of 'XX? $XX Voxbone. going from you're Is willing directly to on I'm you're COVID-driven, framing folks get this of baseline, be political if at was non-recurring initial on that to at of to at commentary obviously, polish sort effectively point? kind XXX anything that But willing this sure how trying give in you much up or there you're either the thoughts any you how And 'XX give

Jeff Hoffman

And thinking the call the think and XXXX Yes. our would just a things about: and hard economic we those the COVID uncertainty I business the Rich, some think some next tail may that's that consider out encounter macro terms will of underlying one, you comps I for strong of political detail now, but that about think should fundamentals, of lot and of have obviously, more to things the and as messaging about on also likely there. in say the outlook. But off. then we'll

So have that's you I'd what kind think of about.

Rich Valera

growth you on point? Fair $XX then in Voxbone I we growth are enough. to And like you for this the should there? XXXX. about Any we expected thoughts think think say kind said million of how about annualized anything the at --

Jeff Hoffman

you're that and but achieve in least said Yes. that at for Nothing $XX them growth. total expect share XXXX for XXXX, or to In we XX% represent would right. to more XXXX, we million revenue,

we'll closing next this So say focused point, beginning transaction, integration. call. the have And to the at on we're more again, on

Operator

Your Securities. next JMP with Walravens question comes from Pat

Pat Walravens

your So smoothly of Dave, sort in sure as as list goes how of terms Voxbone -- that making what's possible? to-do on

David Morken

first, comes do integration. first as that's no Pat, Oath operating Hippocratic The principle that's harm. And first, plan the we the

The complementary customer either how integration Both familiar excited are the is, sides. the about the a both value no how But customer then to one do get we're heuristic And that accretive. principles teams or the Bandwidth impressive. with And the harm. is experience leadership on have let's very as one working and There's our to is at X those combination the very excited experience. utilizing Voxbone first, is, of for so we And for about customer integration. second technology are that base obligation Bandwidth side services team thinking as on is they're create are guide the a a we are, the the really team. how about lead

Pat Walravens

quickly with remind can terms then separate latest a the just I one. of relationship Can little Communication and in then Services? more Microsoft of this in if us a history color around And provide you evolution the add Great. Azure

David Morken

In that Services and the Azure be same high-quality Microsoft available customers through reverse order, of announcement included their Microsoft that Communication platform. Pat, Teams enjoy the experience will

Microsoft to We are primary and a partner. be delighted Microsoft long-term Teams’

that we continuing so together got about important believe we've And and with really And excited role. to work them. a proud we're

Operator

Capital Kurtz question comes Alex Markets. KeyBanc next with from Our

Unidentified Analyst

This Alex. for is in actually George

have will the all back margin do any Do expect Going for you effects? to increase what traffic gross outlook. acquisition, for to expect this longer-term to you Voxbone mean network

Jeff Hoffman

is George, Jeff. this

long-term of right that be gates. we be to of then terms larger we scale in from will accretive, business, So having expect out the to And gross economies acquisition the as expect Voxbone and benefit margin, continue additionally, network of well effects. as to a

Operator

question comes from Walkley next Genuity. Mike with Canaccord Your

Mike Walkley

follow-up question Voxbone. Just on another

Now global been share if you've feedback forth experience some customers? create of leading can the to deal a that for you American maybe some your North customers, announced and of it's footprint or more and back any for and one opportunities to larger the has gone some customer upsell cross-sell

David Morken

so two been to response provide The Enthusiasm, is coming overall what a positive. anecdotally, together of us. world. teams to comments, offering customer excitement just some the universally about This That's the has around been David. took the unified long, encouraging you really

embraced certainly, been so for for our far. You things doing them. customers that's And always the case hope be and in your expect by you'll new experience

as cross-sell tremendous think forward. of upsell, to look opportunity terms we In begin and there's we

Mike Walkley

last quarter reviewing customers my special you early large dollar-based just talked net follow-up question, the over were quarter? in any or with retention, closed deals And deals any there about the XXX% like

Jeff Hoffman

to out, again, broad-based, special higher usage, the by voice messaging No, on and call driven both very side. nothing

on charges. We favorable pricing well our as also monthly recurring as contribution from found

performance. a just So across board, the great

Operator

with Your next Stanley. Meta Marshall question Morgan from comes

Meta Marshall

that of in uptick customer seen earlier the kind the new of was we've from some your year. an On adds, that slowdown

seeing Just kind bringing far a wanted color a Are virtually? you're there yet as sales sense for get new processes your selling of Just what to on as normal customers? enterprise getting reps be would traveling people or of sales helpful. to used of any

David Morken

customer sales leadership -- of being and the some welcomes been with year have not business just to execution, a it's been it's And customers rewarding of do us really We a connections. at for friction do total be and done really getting fight over watch the proud only is travel their so sales milestone. through continue and the to able team really great X,XXX to where shows to enterprise

comradery marketing show So important couldn't for are prouder that sales for generation, through. team showing results and morale, in-person the the and the really of be the team often their their demand

appreciate kind words. So your

Meta Marshall

of And on clearly, globally. for then Voxbone, or your opportunity some just of, terms a great more in opportunity there good to relationships expand

Just more you of in network? terms when of Voxbone's utilizing and some could utilizing expanding globally or contracts start of your timing

David Morken

for equivocally closing yield compound. around that Jeff economies continue the time made of on of and the We're transaction But believe as both progress the worldwide. the effects really and world in will Network of excited the also, march full about customers we'll period-over-period-over-period-over-period, that we complementary quality networks addition and bedrock gross margin nature together. scale inexorably we've with the as an just and this mentioned,

we're so really excited. And

Operator

from Your question comes next Collier King Andrew with Securities.

Andrew King

into strategy give operating First in can I and of long-term your insight into just channel COVID. you the digital Jeff, to do margin you that acquisition change a medium any marketing? event then with seeing the us deeper on to uptick dive bigger And How for going strategy? get wanted Voxbone, just second your forward a you Are trend? digital off,

David Morken

creativity engaging pivoted enterprise and mentioning, and The who wine shows physical are for this been sometimes to sales going and performance quarter. whether has just was and significantly digitally season, great conference flexibility deliveries like we call the Enterprise in contemporaneous to hosting marketing team, from arranging introducing prospects cheese a rallied that they've has away to of so to lot I kind in webinar, they've or or energy Connect this demonstrated drive and and creative It to of really Bandwidth a for events latest as continuing and to contribution world our a at it's great a in pipeline takes team. of the contributed seminar

Jeff Hoffman

And this Jeff. is

think margins, only business our acquisition, merits, Voxbone company. strategic be profitable to They've net non-GAAP been in not to attractive profile to a As also And one accretive the our we things throughout that history. was of but addition the gross income. financial was in the that really their acquiring far as us to the will the

Operator

question-and-answer today's concludes This This call. concludes the session. conference

disconnect you may lines. day. You your participating, pleasant for Thank a have and

Bandwidth (BAND) 29 Oct 202020 Q3 Earnings call transcript