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Core Viewpoint - Bandwidth (BAND) reported quarterly earnings of $0.36 per share, missing the Zacks Consensus Estimate of $0.38 per share, and showing a decline from $0.43 per share a year ago, indicating a -5.26% earnings surprise [1] Financial Performance - Bandwidth posted revenues of $191.9 million for the quarter ended September 2025, surpassing the Zacks Consensus Estimate by 1.05%, but down from $193.88 million year-over-year [2] - Over the last four quarters, the company has exceeded consensus revenue estimates four times [2] Stock Performance - Bandwidth shares have declined approximately 1.5% since the beginning of the year, contrasting with the S&P 500's gain of 17.2% [3] Future Outlook - The company's earnings outlook is crucial for assessing future stock performance, with current consensus EPS estimates at $0.48 for the coming quarter and $1.59 for the current fiscal year [7] - The Zacks Rank for Bandwidth is currently 4 (Sell), indicating expected underperformance in the near future [6] Industry Context - The Communication - Infrastructure industry, to which Bandwidth belongs, is currently ranked in the bottom 23% of over 250 Zacks industries, suggesting potential challenges ahead [8]

Financial Data and Key Metrics Changes - Total revenue for Q3 2025 was $192 million, an 11% year-over-year increase, normalized for the previous year's political campaign revenue [17] - Cloud Communications Services revenue reached $142 million, reflecting an 8% year-over-year increase on a normalized basis [17] - Adjusted EBITDA was $24 million, exceeding expectations due to higher revenue and lower spending [18] - Non-GAAP gross margin remained strong at 58% [17][18] - Free cash flow generated in the quarter was $13 million, with a trailing 12-month free cash flow growth of 35% year-over-year [18][21] Business Line Data and Key Metrics Changes - Enterprise Voice revenue increased by 22% year-over-year, driven by strong adoption among existing customers and new customer ramping [19] - Programmable Messaging achieved a normalized growth of 6% year-over-year [20] - Average annual revenue per customer reached a record of $231,000, growing 46% over the last three years [21] Market Data and Key Metrics Changes - The net retention rate for Q3 was 105%, and 107% when excluding political campaign revenue [20] - The largest customer category grew revenue by 7% year-over-year, more than doubling the growth rate from the previous year [20] Company Strategy and Development Direction - The company is evolving its business model towards a higher mix of recurring software-driven revenue and adding intelligent automation and value-added services [5] - The focus is on being the provider of choice for conversational AI deployment, with a strategy that includes native AI within CCaaS platforms and public APIs [7][8] - The Trust Services portfolio was highlighted as a key lever for competitive advantage, addressing customer challenges related to call answer rates [11][12] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the continued momentum in voice AI and increasing software revenue, positioning the company for a solid fourth quarter and start to the new year [22] - The company anticipates continued growth in Global Voice Plans and Enterprise Voice customers, along with a robust political campaign messaging season [23] Other Important Information - The company won the Technology Disruptor award from Ally Financial, recognizing its role in transforming customer experience [5] - The introduction of new AI-driven products, such as the AI Receptionist and Bandwidth Activation Agent, aims to enhance customer experience and operational efficiency [9][10] Q&A Session Summary Question: Can you characterize overall demand and customer conversations? - Management noted a record number of $1 million plus revenue customers, reflecting broad-based demand and healthy growth in voice [30] Question: What are the 2026 medium-term targets? - The company aims for above-market revenue growth, 60% and greater gross margins, 20% and greater EBITDA margin, and 15% and greater free cash flow margin [32] Question: How are new products impacting Enterprise Voice and Global Voice Plans? - New products are initially launched for enterprise customers but are quickly adopted by Global Voice Plans customers due to overlapping interests [49] Question: What trends are seen with the Number Reputation Management product? - The product addresses consumer trust issues and is expected to have a global opportunity, driving customer wins [70]

Financial Performance - Total revenue for Q3 2025 was $191.9 million, a slight decrease of 1% compared to $193.9 million in Q3 2024[18] - Gross profit for Q3 2025 increased to $73.8 million, up 1% from $73.1 million in Q3 2024[18] - Operating loss for Q3 2025 was $2.0 million, compared to a loss of $0.9 million in Q3 2024[18] - Net loss for Q3 2025 was $1.2 million, compared to a net income of $0.4 million in Q3 2024[18] - Total revenue for the three months ended September 30, 2025, was $191.9 million, compared to $193.9 million for the same period in 2024[101] - Total revenue for the nine months ended September 30, 2025, was $546.1 million, compared to $538.5 million for the same period in 2024[101] - The company reported a net loss attributable to common stockholders of $1.24 million for the three months ended September 30, 2025[124] - The net loss for the three months ended September 30, 2025, was $1,241,000, while the net income for the same period in 2024 was $413,000[211] Assets and Liabilities - Total assets as of September 30, 2025, increased to $1,033.3 million, up from $989.2 million as of December 31, 2024[15] - Cash and cash equivalents decreased to $73.4 million from $81.8 million as of December 31, 2024[15] - Accounts receivable increased to $93.4 million, up from $86.5 million as of December 31, 2024[15] - Total stockholders' equity rose to $392.7 million, compared to $312.5 million as of December 31, 2024[15] - As of September 30, 2025, total financial assets amounted to $62.091 million, with cash and cash equivalents at $55.092 million and marketable securities at $6.999 million[61] - Total accrued expenses and other current liabilities decreased to $85,221,000 as of September 30, 2025, down from $101,819,000 as of December 31, 2024[67] - Total lease obligations as of September 30, 2025, were $224,714,000, with long-term lease obligations amounting to $221,059,000[72] Cash Flow and Financing Activities - Cash provided by operating activities for the nine months ended September 30, 2025, was $50,877,000, an increase from $47,365,000 in 2024[32] - The company incurred a net cash used in financing activities of $29,076,000 for the nine months ended September 30, 2025, compared to $106,144,000 in 2024[32] - The total cash, cash equivalents, and restricted cash at the end of the period was $73,698,000, a decrease from $75,261,000 at the end of the previous year[32] - The company had no outstanding borrowings under the Credit Facility, with an available borrowing capacity of $150.0 million as of September 30, 2025[84] - The company may need to seek additional equity or debt financing to meet future capital requirements, which could adversely affect its business and financial condition if not raised on acceptable terms[191] Research and Development - Research and development expenses for Q3 2025 were $33.0 million, an increase of 9% from $30.2 million in Q3 2024[18] - Research and development expenses for the three months ended September 30, 2025, were $33 million, an increase from $30 million in the same period of 2024[151] - Research and development expenses increased by $3 million, or 9%, for the three months ended September 30, 2025, reflecting continued investment in network infrastructure[160] Stock-Based Compensation - The company reported stock-based compensation of $38,448,000 for the nine months ended September 30, 2025, compared to $35,148,000 in 2024[32] - Total stock-based compensation expense for the three months ended September 30, 2025, was $12.33 million, compared to $11.45 million for the same period in 2024[108] - Stock-based compensation expense for the nine months ended September 30, 2025, was $38,448,000, up from $35,148,000 in 2024, reflecting an increase of about 6.5%[211] Debt and Convertible Notes - The Company issued $400.0 million of 0.25% Convertible Notes due 2026, with net proceeds of approximately $344.7 million after costs[85] - The Company issued $250.0 million of 0.50% Convertible Notes due 2028, with net proceeds of approximately $217.0 million after costs[88] - The net carrying amount of the liability components of the Convertible Notes was $254.9 million as of September 30, 2025, compared to $281.3 million as of December 31, 2024[97] Tax and Effective Tax Rate - The effective income tax rate for the three months ended September 30, 2025, was 64.8%, compared to 228.7% for the same period in 2024[119] - The effective tax rate for the three months ended September 30, 2025, was 64.8%, a decrease from 228.7% in the same period of 2024[148] - For the nine months ended September 30, 2025, the Non-GAAP effective income tax rate was 17.2%, compared to 15.5% for the same period in 2024[208] Revenue Recognition and Future Commitments - The company recognized revenue of $1.5 million and $5.1 million during the three and nine months ended September 30, 2025, respectively, from deferred revenue balances[103] - The company expects to recognize $8.4 million in revenue over the next 12 months related to its contract liabilities as of September 30, 2025[103] - Future commitments include $258 million in Convertible Notes, $456 million in future minimum rent payments for office space, and $19 million in non-cancelable purchase obligations[192]

Financial Performance - Total revenue reached $756 million[12], with cloud communications revenue accounting for $555 million[12] - Adjusted EBITDA was $92 million[12], reflecting a 19% year-over-year growth[12] - Free cash flow amounted to $56 million[12], a 35% increase year-over-year[12] - The company is projecting approximately 10% year-over-year total revenue growth for 2025, normalized for political campaign revenue[40] Customer Metrics - Net Retention Rate (NRR) stood at 107%[18], indicating strong customer loyalty and revenue expansion[18] - Average annual customer revenue was $231,000[38], demonstrating a 9% year-over-year increase[38] Revenue Growth - Total revenue grew by 11% in 3Q25[20], while cloud communications revenue increased by 8%[20] - Non-GAAP gross margin expanded, reaching 58% in both the quarter and year-to-date periods[27] Future Outlook - The company raised its full-year 2025 EBITDA guidance to a range of $89 million to $92 million[40]

Financial Performance - Bandwidth reported Q3 2025 revenue of $192 million, a slight decrease from $194 million in Q3 2024, but a year-to-date revenue increase to $546 million from $539 million in 2024[6] - The company's gross margin remained stable at 38% for Q3 2025, with a Non-GAAP gross margin of 58%[6] - Bandwidth's Adjusted EBITDA for Q3 2025 was $24 million, consistent with Q3 2024, while year-to-date Adjusted EBITDA increased to $68 million from $59 million[6] - The net loss for Q3 2025 was $1 million, compared to a net income of $0 million in Q3 2024, with a year-to-date net loss of $10 million versus $5 million in 2024[6] - Bandwidth raised its full-year Adjusted EBITDA outlook to approximately $91 million, driven by growth in Voice AI and software-driven revenue[6] - The company projects full-year 2025 revenue guidance of $747 million to $760 million, reflecting a 9% to 11% year-over-year growth after adjusting for a cyclical reduction in political campaign messaging activity[8][9] Operating Metrics - Bandwidth's cash flow from operating activities for Q3 2025 was $22 million, up from $20 million in Q3 2024, with free cash flow of $13 million compared to $14 million in the prior year[6] - Revenue for Q3 2025 was $191.9 million, a slight decrease of 1% compared to $193.9 million in Q3 2024[24] - Gross profit for Q3 2025 increased to $73.8 million, up 1% from $73.1 million in Q3 2024, maintaining a gross profit margin of 38%[24][31] - Operating loss for Q3 2025 was $2.0 million, compared to a loss of $0.9 million in Q3 2024[24] - Total operating expenses for Q3 2025 were $75.8 million, an increase of 2% from $74.0 million in Q3 2024[24] Research and Development - Research and development expenses rose to $33.0 million in Q3 2025, up from $30.2 million in Q3 2024, reflecting a focus on innovation[24] Cash and Assets - Cash and cash equivalents as of September 30, 2025, were $73.4 million, down from $81.8 million as of December 31, 2024[26] - Total assets increased to $1.03 billion as of September 30, 2025, compared to $989.2 million as of December 31, 2024[26] Stock-Based Compensation - The company recognized total stock-based compensation expense of $12.3 million for Q3 2025, compared to $11.4 million in Q3 2024[24] - Stock-based compensation for the nine months ended September 30, 2025, totaled $38,448,000, an increase from $35,148,000 in 2024[34] Non-GAAP Metrics - For the three months ended September 30, 2025, Bandwidth Inc. reported a Non-GAAP net income of $11,462,000, compared to $12,791,000 for the same period in 2024, reflecting a decrease of 10.4%[34] - The Adjusted EBITDA for the nine months ended September 30, 2025, was $68,432,000, an increase of 16.7% from $58,634,000 in the same period of 2024[36] - Free cash flow for the three months ended September 30, 2025, was $13,135,000, a decrease of 7.8% compared to $14,245,000 in 2024[37] - The net cash provided by operating activities for the nine months ended September 30, 2025, was $50,877,000, up from $47,365,000 in 2024, indicating a growth of 5.3%[37] - The company reported a Non-GAAP net income per diluted share of $0.36 for the three months ended September 30, 2025, compared to $0.43 in 2024, reflecting a decrease of 16.3%[34] - The Non-GAAP effective income tax rate for the nine months ended September 30, 2025, was 17.2%, compared to 15.5% in 2024[34] Strategic Initiatives - Bandwidth announced the launch of new AI-powered services, including the AI Receptionist and AI Activation Agent, aimed at enhancing customer engagement and operational efficiency[11] - The company emphasized its strategy of embedding AI across its cloud platform to enhance service offerings and customer engagement[4] - The company secured a record number of million-dollar-plus deals for mission-critical communications during the quarter[4] Debt and Financial Adjustments - Bandwidth Inc. incurred a net loss of $1,241,000 for the three months ended September 30, 2025, compared to a net income of $413,000 in 2024[34] - Bandwidth Inc. reported a net gain on extinguishment of debt of $(1,082,000) for the nine months ended September 30, 2025, compared to $(10,267,000) in 2024[34]

Core Insights - Bandwidth Inc. reported strong financial results for Q3 2025, exceeding revenue and profitability guidance, driven by core voice usage and software growth [1][5] - The company is focusing on AI integration across its cloud platform, enhancing customer engagement and operational efficiency [2][5] Financial Highlights - Q3 2025 revenue was $191.9 million, slightly down from $193.9 million in Q3 2024, while year-to-date revenue for 2025 reached $546.1 million, up from $539 million in 2024 [4][22] - Gross margin remained stable at 38% for both Q3 2025 and Q3 2024, with a non-GAAP gross margin of 58% for both periods [4][22] - The net loss for Q3 2025 was $1.2 million compared to a net income of $0.4 million in Q3 2024, with an adjusted EBITDA of $24.3 million for Q3 2025, up from $24 million in Q3 2024 [4][22][29] Operational Highlights - The company raised its full-year Adjusted EBITDA outlook to approximately $91 million, reflecting strong momentum in Voice AI and software-driven revenue [5] - Bandwidth's customer base includes significant enterprises across various sectors, leveraging its cloud communications solutions for enhanced operational capabilities [9] Financial Outlook - For the full year 2025, Bandwidth projects revenue between $747 million and $760 million, representing a year-over-year growth of 9% to 11% [7][8] - The company anticipates continued growth in Voice and Voice AI offerings, alongside a strong political messaging season contributing to revenue [5][7]

Core Viewpoint - Bandwidth Inc. will report its financial results for Q3 2025 on October 30, 2025, before market open, and will provide a live webcast of the conference call [1]. Group 1: Financial Reporting - The financial results for the third quarter ended September 30, 2025, will be announced before market open on October 30, 2025 [1]. - A live webcast of the conference call will be available on the Investor Relations section of the company's website, with a replay accessible shortly after the event [1]. Group 2: Conference Call Details - The conference call is scheduled for October 30, 2025, at 8:00 a.m. Eastern Time [2]. - Domestic and international dial-in numbers are provided for participants [2]. - A replay of the call will be available until November 6, 2025, with specific dial-in numbers and a passcode for access [2]. Group 3: Company Overview - Bandwidth Inc. is a global cloud communications software company that provides voice calling, text messaging, and emergency services [3]. - The company operates in over 65 countries and covers more than 90% of global GDP, serving major clients like AWS, Cisco, Google, Microsoft, and others [3]. - Bandwidth is recognized as a pioneer in the cloud communications sector, offering a unique combination of APIs, AI capabilities, and a robust network [3].

Core Insights - Bandwidth Inc. has been awarded the 2025 "Ally Technology Disruptor" award by Ally Financial for its contributions to enhancing customer experience through modernized communication infrastructure and AI-driven engagement [1][2][4] Company Achievements - The award recognizes Bandwidth's role in Ally's customer experience transformation, which includes modernizing communications infrastructure and accelerating cloud migration [2][3] - Bandwidth's Communications Cloud has transitioned Ally's communications from traditional telecom to a software-driven model, resulting in cost savings, greater flexibility, and enhanced control [3][4] Leadership Statements - David Morken, Co-Founder and CEO of Bandwidth, expressed pride in being recognized as a disruptor alongside Ally, emphasizing shared values in creating better customer experiences [4] - Sathish Muthukrishnan, Chief Information, Data & Digital Officer at Ally Financial, highlighted the importance of superior execution and partnership in achieving innovation in digital banking [3] Industry Position - Bandwidth is positioned as a trusted partner for innovative financial institutions, showcasing its role in advancing technology strategies and business outcomes [5]

Core Insights - The article emphasizes the importance of utilizing Zacks Premium for investors to enhance their stock market strategies and confidence in investing [1][2] Zacks Style Scores - Zacks Style Scores are indicators designed to help investors select stocks with the highest potential to outperform the market within a 30-day timeframe, rated from A to F based on value, growth, and momentum characteristics [3] - The Value Score focuses on identifying undervalued stocks using financial ratios such as P/E and Price/Sales [4] - The Growth Score assesses a company's financial health and future growth potential through earnings and sales projections [5] - The Momentum Score identifies optimal times to invest based on price trends and earnings estimate changes [6] - The VGM Score combines all three styles, providing a comprehensive rating based on value, growth, and momentum [7] Zacks Rank and Style Scores Interaction - The Zacks Rank is a proprietary model that uses earnings estimate revisions to simplify portfolio building, with 1 (Strong Buy) stocks achieving an average annual return of +23.64% since 1988, significantly outperforming the S&P 500 [8] - There are over 800 stocks rated 1 or 2, making it essential for investors to utilize Style Scores to narrow down their choices [9] - To maximize returns, investors should target stocks with a Zacks Rank of 1 or 2 and Style Scores of A or B, while also considering the direction of earnings estimate revisions [10][11] Company Spotlight: Bandwidth - Bandwidth, founded in 2000 and based in Raleigh, NC, is a Communications Platform-as-a-Service (CPaaS) provider, specializing in voice and messaging services with a Tier 1 network [12] - Bandwidth holds a Zacks Rank of 3 (Hold) and a VGM Score of A, indicating potential for growth, with an expected year-over-year earnings growth of 18.7% for the current fiscal year [13] - The company has seen positive revisions in earnings estimates, with the Zacks Consensus Estimate increasing to $1.59 per share, alongside an average earnings surprise of +16.7% [13][14]