Bandwidth beats Street - but stock still slumps 25%

RALEIGH – Bandwidth reported earnings and fourth quarter results that surpassed the guidance provided by the company, the company reported on Thursday morning.

“We are pleased with our solid fourth quarter performance despite the broader macro-market uncertainties,” said David Morken, the CEO of Bandwidth, in a statement released by the company prior to the opening of the trading day.

For the year, the company generated $573 million in total revenue, an increase from $491 million in revenue in 2021. And $157 million in revenue came in the door during the fourth quarter of 2022, according to the company’s financial report, surpassing the fourth quarter of 2021, when the firm brought in $126 million.

That mark also surpassed expectations, by $10 million, Morken noted on an investor conference call on Thursday morning.

And the company surpassed expectations for earnings, as well, reporting earnings per share of $0.19 while estimates had been $0.04 per share.

Still, prior to the opening of the stock markets on Thursday, the company’s stock was trading at $20.51 per share, as of 9:01 a.m. That’s down nearly 14% from where the company’s stock price closed on Wednesday. But the company’s stock was trading nearly 25% off of the prior day’s close as of 2:30 p.m.

Bandwidth shares (down 73% in ’22) bounce 5% after Street beat, profit forecast

CEO calls company ‘more confident’ than ever before

“We are more confident in our future than we have ever been before,” said Morken on the call, in reference to the company’s position in the marketplace, the expanding addressable market for its services, and its 2022 performance.

On that performance, the company had also delivered an earnings surprise in their third-quarter 2022 report in December, with a trailing four-quarter earnings surprise of 301.8% on average, according to Zacks Equity Research.

Now, the company is turning to focus even more on artificial intelligence, said Morken during the investor conference call. The firm launched Call Assure in 2022, which expanded the company’s ability to provide first responders an alternative routing mechanism to ensure these critical communications are not disrupted.

“Our success highlights the resilience and increasing diversification of our revenue streams, and our expanding direct-to-enterprise strategy,” said Morken in a statement. “Enterprises can upgrade their brand experience, lower operational costs, take advantage of AI technologies, reduce regulatory burdens and streamline digital transformation by migrating voice, text messages and emergency calling to the cloud — all with Bandwidth.”

Bandwidth Call Assure expands toll-free product offerings, protects businesses during disaster

Profits can be reinvested in innovation

But gross margin fell from 44% in 2021 to 42% in 2022, though the fourth quarter gross margin remained the same year-to-year at 41%.

Still, the company reported positive change in net income, both for the year and for the quarter. According to the company’s financial statement, the Raleigh-headquartered firm generated $33 million in net income in the fourth quarter of 2022 compared to a net loss of $8 million in the fourth quarter of 2021.

For the year, the company generated $20 million in net income, compared to a net loss of $27 million during 2021, according to the report.

And every extra dollar generated in boosting gross margin, said Morken in a virtual investor conference on Thursday morning, could become “available for reinvestment in innovation.”

The company surpassed Wall Street’s expectations on quarterly revenue, as consensus estimates had been $147 million, according to Zacks Equity Research.

And the company expects to surpass greater than 60% gross margin over the next three years, according to Morken. That will come with 10-15% of revenue growth in each of those years, too, said Morken during the investor call.

“”Looking ahead to 2023, we expect revenue growth to be constrained in the current macroeconomic environment and also impacted by campaign messaging cyclicality,” said Daryl Raiford, chief financial officer for Bandwidth. “We have a disciplined operating team and expect to grow Adjusted EBITDA by 30%, driving profitability through operating leverage.”