Bandwidth Inc. BAND reported impressive second-quarter 2020 financial results, with the top and the bottom line surpassing the Zacks Consensus Estimate. Higher CPaaS revenues and accretive subscriber base backed by strong business model bolstered Bandwidth’s financial performance.
Bottom Line
On an adjusted basis, quarterly net income was $3.1 million or 13 cents per share against net loss of $0.9 million or a loss of 4 cents per share in the year-ago quarter. The year-over-year improvement can be primarily attributed to adjustments due to income tax expenses in the reported quarter. The bottom line beat the consensus estimate by 13 cents.
On a GAAP basis, net loss in the June quarter came in at $20.6 million or a loss of 86 cents per share against net income of $3.5 million or 14 cents per share in the prior-year quarter. The drastic year-over-year decline was caused by higher operating expenses.
Bandwidth Inc. Price, Consensus and EPS Surprise
Revenues
Quarterly revenues came in at $76.8 million compared with $56.8 million in the year-ago quarter. The 35.2% year-over-year increase was primarily due to higher CPaaS revenues. The top line surpassed the consensus estimate of $70 million.
Quarterly Segment Results:
CPaaS revenues rose 39.8% to $67.1 million from $48 million in the year-ago quarter. Accounting 87.4% of total revenues, the improvement was primarily bolstered by higher demand for work-from-home connectivity solutions amid coronavirus-induced lockdown. Backed by a robust business model, the segment witnessed 29.5% surge in CPaaS customers during the reported quarter. Markedly, the dollar-based net retention rate was 133% compared with 113% in the prior-year quarter.
Adjusted CPaaS gross profit came in at $32.1 million from $ 23.1 million in the year-ago quarter with respective margins of 48%. Notably, Bandwidth ended the quarter with 1,900 active CPaaS customers.
Contributing 12.6% to total revenues, Other revenues increased 10.2% to $9.7 million from $8.8 million in the year-ago quarter.
Other Details
Total operating expenses were $35 million compared with $30.5 million in the prior-year quarter, primarily due to higher R&D and general & administrative expenses. Operating loss improved to $0.3 million from a loss of $3.8 million. Adjusted gross profit in the quarter improved 31.2% to $37.1 million from $28.2 million in the prior-year quarter with respective margins of 48% and 50%. Adjusted EBITDA totaled $5.5 million compared with $0.02 million in the year-ago quarter.
Cash Flow & Liquidity
During the first six months of 2020, Bandwidth utilized $0.3 million of net cash in operating activities compared with utilization of $5.4 million in the year-ago period. The company witnessed a negative free cash flow of $9.4 million in the first half of the year compared with a negative $14.9 million in the prior-year period. As of Jun 30, the company had $291 million in cash and equivalents with total current liabilities of $48.7 million.
Q3 and Full Year 2020 Guidance
Bandwidth provided the outlook for third-quarter and full-year 2020. For the third quarter, revenues are expected in the range of $76-$76.5 million. Adjusted EPS is anticipated to be a loss of 3 cents per share to a loss of 1 cent per share. CPaaS revenues are projected to be in the band of $67.1-$67.6 million.
For full-year 2020, revenues are anticipated to be in the range of $296.8-$298.3 million. Adjusted EPS is anticipated to be in the range of 5 cents per share to 11 cents per share. CPaaS revenues are projected to be in the band of $260.3-$261.8 million.
Zacks Rank & Stocks to Consider
Bandwidth currently carries a Zacks Rank #2 (Buy).
A few better-ranked stocks in the broader industry are Calix, Inc. CALX, T-Mobile US, Inc. TMUS and Turtle Beach Corporation HEAR, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Calix’s bottom line surpassed the Zacks Consensus Estimate in the last four quarters. The company has a trailing four-quarter earnings surprise of 59.7%, on average.
T-Mobile’s bottom line surpassed the Zacks Consensus Estimate in the last four quarters. The company has a trailing four-quarter earnings surprise of 19.4%, on average.
Turtle Beach’s bottom line surpassed the Zacks Consensus Estimate in the last four quarters. The company has a trailing four-quarter earnings surprise of 46.4%, on average.
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