Bandwidth Announces Fourth Quarter & Full Year 2018 Financial Results

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RALEIGH, N.C., Feb. 13, 2019 /PRNewswire/ — Bandwidth Inc. (NASDAQ: BAND), a software company focused on communications for the enterprise, today announced financial results for the fourth quarter and full year ended December 31, 2018.

“The fourth quarter was a strong finish to an outstanding year,” stated David Morken, chief executive officer of Bandwidth. “Demand for our offerings remains robust as our combination of flexible APIs and a vertically integrated all-IP voice network clearly resonates with enterprise customers. The foundation of our strong results are rooted in serving our enterprise customers well and continuing to expand those relationships.  Additionally, we  significantly expanded our sales, marketing and technology teams and are excited about the potential of our augmented sales team coming to full productivity throughout 2019.  We believe we are well positioned to capitalize on a growing CPaaS market in 2019 and are committed to our customer’s success in the year ahead.”

Fourth Quarter 2018 Financial Highlights

  • Revenue: Total revenue for the fourth quarter of 2018 was $52.3 million, up 23% compared to $42.5 million for the fourth quarter of 2017. Within total revenue, CPaaS revenue was $44.1 million, up 26% compared to $35.0 million for the fourth quarter of 2017. Other revenue contributed the remaining $8.2 million for the fourth quarter of 2018. Other revenue was $7.5 million in the same period last year.
  • Gross Profit: Gross profit for the fourth quarter of 2018 was $23.6 million, compared to $19.6 million for the fourth quarter of 2017. Gross margin for the fourth quarter of 2018 was 45%, compared to 46% for the fourth quarter of 2017. Non-GAAP gross profit for the fourth quarter of 2018 was $24.9 million, compared to $20.7 million for the fourth quarter of 2017. Non-GAAP gross margin was 48% for the fourth quarter of 2018, compared to 49% for the fourth quarter of 2017.
  • Net Loss: Net loss for the fourth quarter of 2018 was $(1.3) million, or $(0.07) per share, based on 18.4 million weighted average diluted shares outstanding. During the fourth quarter of 2017, net loss attributable to common stockholders was $(0.6) million, or $(0.04) per share, based on 14.9 million weighted average basic shares outstanding for the fourth quarter of 2017. This includes a charge of $2.1 million or $0.14 per share related to the enactment of the Tax Cuts and Jobs Act in December 2017 due to the remeasurement of our deferred tax assets at the lower corporate tax rate.
  • Non-GAAP Net (Loss) Income: Non-GAAP net loss for the fourth quarter of 2018 was $(0.8) million, or $(0.04) per share, based on 18.4 million weighted average basic shares outstanding. This compares to a Non-GAAP net income of $1.6 million, or $0.09 per share, based on 18.1 million weighted average diluted shares outstanding for the fourth quarter of 2017.
  • Adjusted EBITDA: Adjusted EBITDA was $(0.1) million for the fourth quarter of 2018, compared to $4.4 million for the fourth quarter of 2017.

Full Year 2018 Financial Highlights

  • Revenue: Total revenue for the full year of 2018 was $204.1 million, compared to $163.0 million in 2017. Within total revenue, CPaaS revenue was $164.4 million, up 25% compared to $131.6 million in 2017. Other revenue contributed the remaining $39.7 million for the full year of 2018, compared to $31.4 million for the full year of 2017.
  • Gross Profit: Gross profit for the full year of 2018 was $96.0 million, compared to $73.7 million in 2017. Non-GAAP gross profit for the full year of 2018 was $100.6 million, compared to $78.1 million in 2017. Gross margin for the full year of 2018 was 47%, compared to 45% in 2017. Non-GAAP gross margin was 49% for the full year of 2018, compared to 48% in 2017.
  • Net Income: Net income for the full year of 2018 was $17.9 million, or $0.85 per share, based on 21.1 million weighted average diluted shares outstanding. This includes the $11.9 million of excess tax benefits associated with the exercise of stock options and vesting of restricted stock units. This compares to net income from continuing operations attributable to common stockholders of $5.3 million, or $0.37 per share, based on 14.5 million weighted average diluted shares outstanding in 2017. This includes the aforementioned charge of $2.1 million or $0.14 per share related to the enactment of the Tax Cuts and Jobs Act in December 2017.
  • Adjusted EBITDA: Adjusted EBITDA was $16.1 million for the full year of 2018, compared to $22.2 million in 2017.
  • Non-GAAP net income: Non-GAAP net income for the full year of 2018 was $9.0 million, or $0.43 per share, based on 21.1 million weighted average diluted shares outstanding. This compares to a non-GAAP net income of $9.5 million, or $0.59 per share, based on 16.1 million weighted average diluted shares outstanding in 2017.
  • Cash Flow: The Company generated $24.6 million in net cash provided by operating activities for the full year of 2018, compared to $14.6 million during 2017. The Company generated $10.2 million in free cash flow for the year, compared to $6.7 million in 2017.

Additional information regarding the non-GAAP financial measures discussed in this release, including an explanation of these measures and how each is calculated are included below under the heading “Non-GAAP Financial Measures.” A reconciliation of GAAP to non-GAAP financial measures has also been provided in the financial tables included below.

Fourth Quarter 2018 Key Metrics

  • The number of active CPaaS customers was 1,230 as of December 31, 2018, an increase of 27% from 965 as of December 31, 2017.
  • The dollar-based net retention rate was 121% during the fourth quarter of 2018, compared to 111% during the fourth quarter of 2017.

Additional information regarding our active CPaaS customers and dollar-based net retention rate and how each are calculated are included below.

Financial Outlook

As of February 13, 2019, Bandwidth is providing guidance for its first quarter and full year 2019 as follows:

  • First Quarter 2019 Guidance: CPaaS revenue is expected to be in the range of $43.5 million to $44.0 million. Total revenue is expected to be in the range of $51.0 million to $51.5 million. Non-GAAP loss per share is expected to be in the range of ($0.27) to ($0.30) per share, using 19.8 million weighted average basic shares outstanding.
  • Full Year 2019 Guidance: CPaaS revenue is expected to be in the range of $201.0 million to $203.0 million. Total revenue is expected to be in the range of $231.5 million to $233.5 million. Non-GAAP loss per share is expected to be in the range of approximately of ($0.64) to ($0.74) per share, using 19.9 million weighted average basic shares outstanding.

Bandwidth has not reconciled its first quarter and full-year guidance related to non-GAAP net loss to GAAP net loss and non-GAAP loss per share to GAAP loss, because stock-based compensation cannot be reasonably calculated or predicted at this time. Accordingly, a reconciliation is not available without unreasonable effort.

Quarterly Conference Call

Bandwidth will host a conference call today at 5:00 p.m. Eastern Time to review the Company’s financial results for the fourth quarter ended December 31, 2018.  To access this call, dial (877) 407-0792 for the U.S. or Canada, or (201) 689-8263 for international callers. A live webcast of the conference call will be accessible from the Investors section of Bandwidth’s website at https://investors.bandwidth.com, and a recording will be archived and accessible at https://investors.bandwidth.com. An audio replay of this conference call will also be available through February 20, 2019, by dialing (844) 512-2921 for the U.S. or Canada, or (412) 317-6671 for international callers, and entering passcode 13686329.

About Bandwidth Inc.

Bandwidth (NASDAQ: BAND) is a software company focused on communications for the enterprise. Companies like Google, Microsoft, and Ring Central use Bandwidth’s APIs to easily embed voice, messaging and 9-1-1 access into software and applications. Bandwidth is the first and only CPaaS provider offering a robust selection of communications APIs built around their own nationwide IP voice network- one of the largest in the nation.  More information available at www.bandwidth.com.