Bandwidth Inc. ( BAND Quick Quote BAND - Free Report) reported solid third-quarter 2020 financial results, with the top and the bottom lines surpassing the respective Zacks Consensus Estimate. Growing subscriber base and higher Communications Platform-as-a-Service (CPaaS) revenues on the back of dynamic fundamentals buoyed Bandwidth’s financial performance. Bottom Line
On a GAAP basis, net loss in the September quarter was $2.4 million or a loss of 10 cents per share compared with net loss of $1 million or a loss of 4 cents per share in the prior-year quarter. The year-over-year deterioration despite top-line growth was primarily caused by higher operating expenses during the reported quarter and income tax benefit in the year-earlier quarter.
On an adjusted basis, quarterly net income was $6.5 million or 24 cents per share against net loss of $1.4 million or a loss of 6 cents per share in the year-ago quarter. The bottom line beat the consensus estimate by 26 cents. Bandwidth Inc. Price, Consensus and EPS Surprise Revenues
Quarterly revenues came in at $84.8 million compared with $60.5 million in the year-ago quarter. The 40.1% year-over-year increase was primarily driven by higher CPaaS revenues. The top line was further augmented by increased messaging due to the upcoming Presidential elections and higher work-from-home trend owing to the virus outbreak. The top line surpassed the consensus estimate of $76 million.
Quarterly Segment Results
CPaaS revenues surged 43.3% to $73.8 million from $51.5 million in the year-ago quarter. Accounting 87% of total revenues, the improvement was primarily backed by higher demand for work-from-home connectivity solutions amid coronavirus-induced lockdown. Elevated volumes of political messaging traffic was a contributing factor as well. With a resilient business model, the segment witnessed 25.2% jump in CPaaS customers during the reported quarter. Markedly, the dollar-based net retention rate was 131% compared with 116% in the prior-year quarter.
Adjusted CPaaS gross profit jumped to $36.7 million from $24 million in the year-ago quarter with respective margins of 50% and 47%. Notably, Bandwidth ended the quarter with 2,015 active CPaaS customers. Contributing 13% to total revenues, Other revenues increased 22.2% to $11 million from $9 million in the year-ago quarter. Other Details
Total operating expenses were $37.4 million compared with $32 million in the prior-year quarter, primarily due to higher research and development, and general & administrative expenses. Operating income came in at $1.9 million against operating loss of $4.6 million in the year-ago quarter. Adjusted gross profit in the quarter improved 42.6% to $41.6 million from $29.1 million with respective margins of 49% and 48%. Adjusted EBITDA totaled $9.3 million against loss of $0.6 million in the year-ago quarter.
Cash Flow & Liquidity
During the first nine months of 2020, Bandwidth generated $11.3 million of net cash from operating activities against net cash utilization of $3.5 million in the year-ago period. The company witnessed a negative free cash flow of $0.5 million for the same time period compared with a negative $19.3 million a year ago. As of Sep 30, the company had $300.2 million in cash and equivalents with total current liabilities of $57.8 million.
Q4 and Full-Year 2020 Guidance
Bandwidth provided the outlook for fourth-quarter and full-year 2020. For the fourth quarter, revenues are expected in the range of $96.5-$97 million. Adjusted earnings are anticipated to be 3-5 cents. CPaaS revenues are projected to be in the band of $84.3-$84.8 million.
For full-year 2020, revenues are anticipated to be in the range of $326.6-$327.1 million. Adjusted earnings are anticipated to be in the range of 44-46 cents. CPaaS revenues are projected to be in the band of $284.3-$284.8 million. Zacks Rank & Other Stocks to Consider
Bandwidth currently carries a Zacks Rank #2 (Buy).
A few other top-ranked stocks in the broader industry are Calix, Inc. ( CALX Quick Quote CALX - Free Report) , NETGEAR, Inc. ( NTGR Quick Quote NTGR - Free Report) and Extreme Networks, Inc. ( EXTR Quick Quote EXTR - Free Report) , each carrying a Zacks Rank #2. You can see . the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here Calix delivered a trailing four-quarter positive earnings surprise of 72.2%, on average. NETGEAR delivered a trailing four-quarter positive earnings surprise of 60%, on average. Extreme Networks delivered a trailing four-quarter positive earnings surprise of 55.4%, on average. Have You Seen Zacks’ 2020 Election Stock Report?
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