Release Date: May 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Exceeded first-quarter guidance with record quarterly revenue and highest ever adjusted EBITDA for a first quarter.
- Raised full-year outlook on top and bottom lines due to overperformance.
- Strengthened capital structure by expanding existing undrawn revolving credit facility to $100 million and repurchasing $140 million of convertible notes at a discount.
- Reported a 24% year-over-year growth in first-quarter revenue, with cloud communications revenue growing 12% year over year.
- Messaging revenue grew 50% year over year, with commercial messaging up 34%, indicating strong demand across multiple sectors.
Negative Points
- Political campaign messaging revenue is difficult to predict and differentiate from ongoing commercial civic engagement, adding uncertainty to revenue projections.
- Despite overall growth, the global communications plans revenue growth was modest at 4% year over year.
- Free cash flow in the first quarter reflected a $4 million use of cash due to seasonal timing of working capital.
- Chief Operating Officer Anthony Bartolo is leaving the company, which could lead to transitional challenges.
- While gross margin improved, the company maintains a conservative outlook on expected improvements, suggesting potential unseen costs or challenges.
Q & A Highlights
Q: Are your customers feeling better from a macro standpoint, and how are upsells like Maestro helping support these metrics?
A: (David Morken - CEO) Despite ongoing macro and policy concerns, the sentiment across all customer segments is positive, leading to an increased guidance for the year. Upsells like Maestro are contributing to this positive outlook.
Q: How are you thinking about the full-year guide after a stronger raise in the top line compared to the bottom line?
A: (Daryl Raiford - CFO) The revenue guidance increase is primarily due to surcharges and commercial cloud communications revenue, with the latter contributing to the EBITDA raise.
Q: Can we track the progress of Maestro adoption, and should we expect recent capital investment trends to continue?
A: (David Morken - CEO) Maestro adoption is growing substantially, though specific customer numbers aren't disclosed. (Daryl Raiford - CFO) Capital expenditures are expected to align with previous guidance of around 3% of revenue.
Q: Could you discuss the drivers of the strong growth in the messaging business, particularly if it's mostly US-based?
A: (David Morken - CEO) Messaging growth is robust, driven by commercial and enterprise segments, primarily in the US. The international market presents a strong growth opportunity going forward.
Q: Can you provide insight into the business's trajectory given the stock's volatility and the broader industry context?
A: (David Morken - CEO) The business is navigating post-COVID normalization and focusing on cloud communications transformation, which is a fundamental shift in enterprise communication. The leadership and technology at Bandwidth are positioned to capitalize on these industry changes.
Q: How might net retention and gross margins evolve through the year, and what are the expectations for messaging growth?
A: (Daryl Raiford - CFO) Net retention is expected to grow as the customer base stabilizes with more enterprise clients. Gross margins are projected to improve by 100 basis points, reflecting product mix and cost efficiencies. Messaging is anticipated to grow significantly, driven by commercial activities and political campaign messaging.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
