Earnings call transcript Q1 2023

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Operator

Good day. And welcome to the Bandwidth Inc.

First Quarter 2023 Earnings Conference Call. [Operator Instructions] Please also note that this event is being recorded today.

I would now like to turn the conference over to Sarah Walas, Vice President of Investor Relations. ahead. go Please

Sarah Walas

press we afternoon, CFO. earnings Good in at remarks, found to first David can close. Bandwidth's press with earnings Thank financial historical and CEO; Morken, Today, and page me we'll XXXX highlights The market open They the call. issued begin announced and the discuss quarter an prepared investors.bandwidth.com. release will our presentation with you. be after welcome will release the our the then call on Relations call the on and our Daryl With Investor for this is up Raiford, afternoon Q&A. results

second future to statements that outcomes statements be XXXX. obligation made of and caution may the involve forward-looking we statements statements as or the results full call you financial including We During implied actual on uncertainties undue Any them. put may not they forward-looking our risks we expressed the update presentation cause business our from these related this and vary considered will and our no reliance and quarter have results forward-looking, the as that on may make year concerning call, to for to guidance statements. of analysis reflect or to plans in or by forward-looking slides any today, materially

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

close of which our included will today's call, refer issued as presentation, A investors.bandwidth.com. financial certain website after of press release measures in are is market the today the located well non-GAAP earnings at in measures. to as to During the of GAAP non-GAAP our we course reconciliation on

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

David Morken

joining for to us. everyone good to start. thanks and Sarah, a off XXXX you, Thank is

and making strategic progress while enterprise on to products focusing advancing our adding innovative, award-winning are We initiatives solid direct customers developing profitability.

year, categories: to guidance target quarter During want by of year. Thank to the and programmable continuing their all this to you around in our I goal communications. serve selfless well customers of us for our We to and the services XX% customers for growing to with plans, of with thank year customer exceeded are first opportunities. XXth thank our dedication direct-to-enterprise. us our and each communications profitability Bandwidths our meet supporting on and for God extraordinary world Global the I blessing trust we our mission-critical as mission, a distinct X revenue other

This our growing where momentum quarter, market, platform. and we power new our centers software enterprise the contact direct cloud developments we in in highlight to

chose won XXXX during we direct-to-enterprise, centers In that leaders financial as several services quarter. the the for Bandwidth voice provider Global contact their

cloud, recent center contact center Using expanded contact capacity with acquisition. we and the its Visa one with deployed scale in a the MasterCard of up our depth communications cloud Among space. Gartner in contact to enterprise while cloud expansion the bandwidth largest United the breadth existing all power choosing each our our leveraging and communication issuer long-term the the leaders our centers, relationship and Notably, communications their This due strong we're platform stack. to shows customer how help relationships different a in CCaaS of customers, States. this Bandwidth we

region. the to awarded seamlessly Asia this Additionally, this customer this with global Because Pacific connect new needed in new customer across employees were international geographies, we connected coverage we business.

last grown directly utilizing serving the just the X contact over measurable Cloud Bandwidth enterprise customers. number we're show, the seeing centers of Communications examples As tenfold by We've years. in these results enterprise

providing build conversational enterprises from cloud to comes the Our help AI scoring come Bandwidth significant contact and native to fraud and redundancy, to largest pre-integrated industry technology their expertise directly driving numerous verticals centers. scalability, is across

the Successful ahead enterprise communication shapes us strategy is dynamic, and curve. our innovation of strong and of culture keeps

integrated very example, over a we've prioritized we cloud That's AI our ago. into days. R&D from earliest year because communications For our

the fact, has all and For been for our the in foundation last growth XX years, profitability. innovation

capabilities Maestro operations. the create It's connect truly while CIOs UCaaS, with from a need the CCaaS Maestro example, Bandwidth organizations now customer and work. that integration capability experiences and months of integrates is born to it connection saves latest our across platforms experience, streamlining customer must entire best-in-class who better enterprise close and next-generation and AI. CIOs their

achieve revenue. faster enterprises can time to So

lock-in platform-agnostic of is CPaaS Connect. Maestro reaction it its our This achievement slated later the Maestro conversations advancement, substantial ROI Show value Unlike is and to in a to won is of the of business and proving year, has been and flexibility Maestro providing existing excellence We space technology maintains recognition the the encouraging of proprietary in availability approach, for full market proposition with Best in already energize to other with CIOs. innovation both unique this providers, impact, Enterprise early customers at prospects. believe Maestro and

the Maestro just cloud we've Microsoft the and Year prestigious launched our the app and Internet are backup Telephony engine toll-free future calling quarter. of level like messaging recently innovations for award communications our These in for Assure, text Call CX of of innovation shaping the finalist Teams called other which breadth recently are enterprise awards customers. new a solutions Award Product both named Send-To, this joins few examples a our past native solution and won existing was for which of how

We're of and and with long-term technologies, AI dynamic by more stage emerging digital secular more a exciting converging still the becoming early trend cases. use platforms that's day of transformation new in the

product serving competitive categories on and being our innovations our the X penetration while all We're exploiting focused executing maximizing only increasing with with on grow of across direct-to-enterprise provider to momentum, own all our global customers profitably. capitalizing network, customer CPaaS like and advantage Maestro, the new discipline

Daryl the our results. through it turn financial of details walk now to over I'll to

Daryl Raiford

Thank adjusted us million. and EBITDA of you, the quarter, year well and results $X full to everyone. position solid We good achieving first year our deliver $XXX with of David, million afternoon, started a outlook. revenue Both

Revenue compared from which year for X% numbers monthly were emergency excluding revenue, recurring up total and surcharges. up phone benefited services, messaging and higher XX% year-over-year with combined revenue, charges and of last X% representing

care, Our demand basis, a engagement. messaging growth and use solid quarter civic excluding fourth cases, recognized shopping, driven we commercial sequential in surcharges, and including of our for of adjusting in we But verticals. Overall, messaging by had positive political in a effects sequential On than growth was retail across in fintech quarter, e-commerce messaging achieved variety from first lower same those was XQ last as higher the of commercial XX% expected. campaign 'XX health messaging demand

X Pass-through we messaging the with our provide power to million offers products customer surcharges were in $XX the associated these that quarter. markets. of first combination target The

market essentially terms of primarily our year-over-year UCaaS in met In flat that due expectations plans, revenue most to our established our softness results was market, for communications global we in customers.

key services strengthen category quarterly respectively, engagement. evident charges give market messaging will gross programmable prior and to and point is customer first the recurring year-over-year. strong up our quarter. a long-term grew X direct-to-enterprise in a from from and and categories although these And Rounding messaging customer year's of continue Programmable non-GAAP targets. us monthly confidence out our X results, highlighted XX%, the growth our wins today, In undeniable revenue dynamics, to quarter was from as market services XX%, this be the for pipeline achieving driver financial us categories, secular margin percentage is X% customer a small our movement David direct-to-enterprise base

from continue products, We operating global a of to and improvements. higher-margin economies scale, rich of benefit mix coverage

retention was first XXX%. operating terms net quarter metrics, In rate of dollar our our

on benefits customers greater and customers. customers than opportunities. customer quarter, direct-to-enterprise from which result total than dollar $XXX,XXX per another retention customer points was X and more reached customer count as XXX%, the our annual larger diminished hit demonstrable demonstrating percentage net clearly focusing rise on $XXX,XXX focus large in X,XXXalthough in Active from time For Average relevance metric metric larger has profitable annual and first the revenue count the we to customer revenue, continued higher customer, opportunities. the over

by repurchase we of debt $XXX balance, strengthened discount a now million market In opportunistic $XXX for an of XXXX continuously approximate of the value. net $XX convertible capital our of obligation. effectively reduction with best our or $XXX cash principal in environment. outstanding options million further in par million lowered The balance of million first XX% evaluate with convertible XXXX the XXXX our of November erasing use in opportunistic the debt latest We resulting our notes, balance $XX combined another sheet of to maturity balance cash, notes or approximately our remaining quarter, XX, to This of the the the $XX million for repurchase in utilizing only original sheet XX% million debt is stay million. convertible $XXX current repurchased

balance we focus available that growth, and repay needs and than flexibility. we wish million, to our a quarter sufficient financial With the note our cash, our on of is business resolute with with remaining in ended deal cash $XXX and sustain full create respective great upon a to the their the fully choice more securities obligations our make. option amount profitable convertible earnings to We maturities if meet of a

start to achieving of year to guidance year our million of to outlook; million EBITDA. $XXX adjusted at our on-track Turning $XX $XXX the and to in provided the we million full $XX million revenue, are

unchanged the for a outlook despite Our environment. full year macro challenging is

first year. control, our focus customers to our and delighting performance profitable. continue quarter the In summary, start our operating We'll every a we more being the our with becoming financial growing margin, disciplined on solid in serving to and what cost and represents day, can

back the for operator questions. Now, I'll turn call to over the

Operator

first Genuity. Walkley question come will with Our Instructions] here Canaccord from Mike [Operator

Mike Walkley

Silicon seen updated you the have Nice of the year? a as on is David, issues, you, quarter and post of the guess, to anything maybe in Or expected some linearity really and trending guidance. slowing the just to April for March, start question the the and I the business Valley see the Bank you time macro just year, for solid frame?

David Morken

and accurate that like well Thank and we and But first forward both Mike. Very is proud we're everyone, that guiding we executing as the do reflects quarter the this macro banks. defined to of we first remainder the quarter. in the ourselves. the in with throughout execute as things to we believe like performance Nothing have certainly, that year achieved for But to year, the for particular, you, watching things set we've off conditions. call way the would us answer ourselves on what we issues the the in in and see year with we your really believe for plan out, you've started are that internally. question we further again, as a that delighted expected that continue of And team that know expected executing the toward come will objectives for

Mike Walkley

my for position paying you good in the profitable like just It follow-up a debt. your given seems job the down certainly balance And question, history. good guys growth sheet Daryl, have now

similar slightly to QX? kind in the on of or Is the change higher Or mix of margins? guidance of revenue, just any terms expected in Just you kind QX but EBITDA. similar there gross adjusted QX

Daryl Raiford

on some revenue to we real We're believe just expecting guided the $X we have even for macroeconomic QX expecting as second QX. grow happy would also with the We're be our the to it. we're flexibility some million. and our modestly the we give comfortable line derisked have We today that we've pretty operating EBITDA over in conditions quarter Clearly, that pause, guide market there. that witnessed

Operator

question will Morgan with Marshall Stanley. next Meta our come from And

Meta Marshall

I coverage expand wanted that to kind to that I I Connect. get then APAC product your where -- do regions was at point? do meaningful global was kind footprint second, still guess Are Enterprise that are the great kind just you you noting more you into? the should win you your like of expanding regions noted. in of Maestro a you this that that there need was of we at of a piece, And see consider all on have just the of, sense kind you gave or of feel as

XXXX? that, do kind will be in think to that meaningful Just you it ramp? when that, for to Or could revenue? Do product that you time of a meaningful could take think contributor that be

David Morken

way behind we celebrated And really related case from opened, markets built Turkey Regarding the instead did an build we've we and and opening to that trying to business existing so question it your first and demand. we a historically strong customer. they come, will that's follow geographies of

are customers and international and most And geographies some we'll in responsibly. markets very we've favorable relationship user for so experiences, that a us aggressive got for lots with who different those of build invest good identify our of

for by continue owned customers that begin partnering, our following and Meta, beneath software execute you've our a around against the proposition to unique operated value globally platform, strategy Sometimes, that an followed while, but network is then and have to we'll we'll our world.

business In it has believe has very is we regard product that that head toward lot of of long-term that to the from And early Maestro conversations steam but throughout reaction The to going received the on quarter which And arrive will is Enterprise that it this the at car the the essence it That's responses have enterprise winning it of that we growth coming with momentum with Show that and of direct-to-enterprise to future the we've is to way just out growth. throughout this customers train the and been when we to conversations exciting on towards really Best we're leading have think we award-winning for left. excited the exciting your Maestro, so pick and we our is but for will rest be continue revenue not 'XX up targets Maestro, drive direct-to-enterprise. as to beyond product. that question, a year, going continues that the Maestro about team and out related the Connect. the encouraging see the of directly revenue, call may

Operator

Fish come Sandler. with will question next our James And from Piper

James Fish

of like going well as with well? the market noted think also you part some your on prepared what elaborate what are guess, terms the with that in the you David, And seeing? sounds you're things also I seeing you it was of it side customers largest are business. you, on center I as UCaaS side softness that contact in pretty remarks, the of can your in where guys

David Morken

of The Yes. on bring in the single carriers. model fantastic Every your and I'll as start your centers was CCaaS. enterprise in in Lots reverse. related has contact highlighted that with we been carrier the win to own and direct own expected. call consuming momentum CCaaS enterprise wins interest high deal bringing for this

the and UCaaS, it's purely the the We macro for adding that function usage economic conditions, So think result that are to you and growing that's heads, exciting. Usage regarding a attributable macro. are was from of seats pandemic. patterns fewer may UCaaS to the largely healthy prior

is we And not think that factor. return the the primary office so to

expectation And overall for physicians again, within it's to think most important haven't I that UCaaS the either recognize in the the results our our guide and quarter. changed or results,

of it's we've year. all it think and So the us in takes remainder that period, track something that easily at don't for the the for off accounted

James Fish

it was rationalization year again higher-quality count, Helpful. bridge past you on kind was it were rationalization gross of know you And customer then gross it continued ask focused of I clean to on Can guys additions and where larger additions? customer the are is down help kind to in customers. of forward? But this somebody's of sequentially got was much this another quarter? going of kind here. the quarter How you've us the Or given in think of I kind a where think this the versus versus, what count and

David Morken

sorry, to customers, not that the continuing architect that we year. of compare $X,XXX rationalization is a a is average our small month, customer a I'm the excuse unprofitable Those month customers X,XXX -- as are we average, XXX,XXX me, customers. on year, average have It churn ARPU

focus profitable average quarter a said, as We again, customers. which forward doing just up a XXX,XXX we've ago. stated, your germane on as year is That's larger from question projection that's this a and a been is to revenue revenues, what XXX,XXX. enterprise not growth while actually the customer So now, I for have count on yield increasing, continuing, customer from as

that climb what annual and spend we So customer is average aggressive good. our of really want. is

absolute count customer about So we're concerned all the number. not at

Operator

from come will question & Koontz next Needham with our And Ryan Company.

Ryan Koontz

the along. to good see on Really that front. progress business Nice [indiscernible] messaging

if On comment is those think within can and mentioned relative kind in we should those the you I either which segments? how softening counts familiar general for you impact pricing to wonder segments strength on UCaaS and about the tone. and CCaaS, the usage side, of in voice of seat that X in environment

Daryl Raiford

first this price volume, enjoyed improved again increase increase Ryan, pricing was like for impact has by a Pricing the been it SKU by phone mix but Daryl. SKU and favorable pricing. we wasn't is we it in as richer necessarily a aggregate have products pricing When higher-priced look quarter, had at a driven messaging quarters. It and many did of numbers.

Operator

Instructions] Patrick JMP next come from with question [Operator Our here Securities. will Walravens

Patrick Walravens

Great.

talk a little So ChatGPT let's about bit David, here.

So to rep. be eliminated, the top jobs studies is the service like these that of all list customer the the are of going

total that impact do will centers. for Because going out of call is right? don't of -- there what that for So You're charge you're seats number to the you you sort in consumption-based. seat, really more And guys? how

David Morken

We're voice-driven as audio incredible Pat. its the present and were that and high support play, rapidly well. we to reps usage-based, an ChatGPT will conversations voice of potentially excited reliable empowered all that understood like intelligent by role as AI conversational AI text-based which about parameters. in we're Alexa, are robust conversations and well really have orchestrating today right, dawn believe those effective conversational is and migrate among as to were those reps We tools and experienced very that customer stand-alone exactly fidelity, That's at as providing prompt. a products AI for

usage-based is dawn excited new and this of about the Our our so role in we're era. model,

Patrick Walravens

right? happen, seats the Okay. But on to going pressure is

David Morken

space, predict what we of anticipate and overcome teams powerful actually tools with know, are are incredible that work CCaaS and developing I don't some don't how future, to the most utilize the I can't do in out -- adapt the the there. that AI understand I I If while

but that center within teams so precisely which how, this. the your environment, a contact the And their add I the they that very question are is change, the contact I models digital the business all may to is transformation think, But is continue, of over center are one. why value good expect at forefront unclear,

Patrick Walravens

more, as myself reminder a just for everyone Okay. And one else. I and think

you this there's changed? guys right? mean what next that has and year [ph] next year, X% elections, about you quarter, do So growth down but growth I dynamic from feel do So can how terms this in bizarre of XX% about

David Morken

We believe trajectory that our reiterating well thesis long-term one since talked about socialized supports we and put that everything within our the and on firmly Day track is quarter Day. the about that rest we finished the this longer-term the we're executing XX days on on out on in reach, and Investor we guidance for of Investor having plan last that, year,

Operator

very This for also much the and concludes session call. today's our question-and-answer you attending Thank concludes presentation.

disconnect now your may You lines.

Bandwidth (BAND) 2 May 232023 Q1 Earnings call transcript